Why it is so Difficult to follow the Trading Rules?

[Trader 23]

Hi to All

Trading is a platform where human weakness appears in a very cruel form i.e. loss of money. (Money, money, money Always sunny in the richman's world).

The simple task of following the rules is so painful and difficult to say the least. But why?

Why it is so difficult to make rules to guide the trading?

Why it is so difficult to get out in a small trading loss?
Why it is so difficult not to get out in a small profit and let profits run?
Why it is so difficult to stay out and wait for the next opportunity) when the market has gone beyond the determined entry point fast and furiously?
Why it is so difficult not to regret a loss making trade?

The real trading edge comes when a trader is able to overcome the difficulty associated with his trading rules and consistently able to follow them.

The answer most probably lies in in the question "What is the real cause for this difficulty?"

Please share your opinions and experiences.


Trader 23

 

[Black Swan]

I blame ABBA...

 

[the hare]

"What is the real cause for this difficulty?"

Personally I'd say its just a lack of belief in (or understanding of ) your edge.

 

[0007]

Humans are psychologically hard-wired not to fail. Taking losses, getting out early and obeying rules which, on first sight appear to be an admission of failure, all go against the natural grain.

It's like working in an unnatural environment eg. underwater or in the air - you have to learn to do things differently. Experience in other fields shows that training and the reinforcement of routines is a way of changing hard-wired habits. Learn to do this with trading and you are in with more than half a chance.

 

[Hotch]

Personally I'd say its just a lack of belief in (or understanding of ) your edge.

Exactly this!

Once you are confident in your edge and understand it, it's all downhill.

 

[Doomberg]

It took me a looooooooooong time to get discipline but when you realise that you are hurting yourself over and over again and that the majority of your losing trades are due to rule breaks, it becomes easier. And about losses, if i trade my strategies and make a loss i don't care get stressed because i know i was doing what i agreed with myself and gave myself a good chance

 

[Trader 23]

Yeah, rule breaking is the major cause of being a net loser.
And it is quite true than we are hard-wired not to fail.

When traders with some experience make a trading plan they know there will be two or three or even more consecutive losses and they are part of trading if we keep them small. These losses does not reflect failure in any way.

But still when we actually encounter 3 consecutive losses something changes and if the 4th one is also reflecting a loss then the tendency to avoid that loss becomes so strong. This is the time when it becomes so difficult to cut the loss.

It's relatively easy to contemplate 4 or 5 losses in a row. But when they actually happen somehow the mentality changes. The whole process of taking the 4th or 5th consecutive loss becomes such a difficult task.

 

[mattboffey]

One problem i experience is not admitting i am wrong and the market is going to turn round, no guesses for what happens next

 

[the hare]

When traders with some experience make a trading plan they know there will be two or three or even more consecutive losses and they are part of trading if we keep them small.

People are living in a fantasy world if they believe that streaks of losses will be limited to just 2 or 3 trades.

I really would advise reading up on some basic probability theory, and gaining an understanding of what you'll most likely encounter for a given strike rate, and then confirming it with backtests.

Its not just consecutive losses that are the issue.

Handling this stuff even when fully prepared is hard enough, but practically impossible to handle otherwise.

 

[tdrtw]

It appears you know your issue and know what you need to do. A good book to read is Mark Douglas - Trading in the Zone, but then I'm sure you already know this.

The_Hare has made a very good point - belief is very important.

My suggestions would be to keep a very strict diary of your trading and more importantly your deviations from your rules. I did this many years ago when I first started trading live and can honestly say I could never break the double digit percentage in a given month simply because I BROKE my own rules. If I stuck to them and never overrode my rules I would have been far better off. It took me a long time to overcome this, EVEN though I knew it was detrimental behaviour.

>>People are living in a fantasy world if they believe that streaks of losses will be limited to just 2 or 3 trades.

The_Hare is very right here. I personally can spend 2 or 3 weeks in draw down, sometimes longer, and with 2 or 3 good winning days, be back into new highs. On paper it looks easy but being able to have a full belief in what you are doing and know that evetunally your system will come back is not easy at all.

The act of Quantitative Rule Based Trading is in essence very simple, it's our Mind that makes trading so extremely difficult, to point that very few people can be consistently profitable over a long period of time.

My personal opinion is your better off finding something you really love doing and earn an income that way. Don't trade for money, there are so many other enjoyable ways to make it

 

[1only]

Trading requires 100% discipline and as human, we all make mistakes. That is why so hard to following your rules all the time.

 

[Trader 23]

Hi

Dear tdrtw,

Many a times we know our issues but still the issues requires something extra to be resolved.

Take the example of good health. Every body knows that getting up early in the morning and doing some form of exercise, walk etc is must for good health. But for many it is the most difficult thing to do even when it is crystal clear.

 

[Black Swan]

People are living in a fantasy world if they believe that streaks of losses will be limited to just 2 or 3 trades.

I really would advise reading up on some basic probability theory, and gaining an understanding of what you'll most likely encounter for a given strike rate, and then confirming it with backtests.

Its not just consecutive losses that are the issue.

Handling this stuff even when fully prepared is hard enough, but practically impossible to handle otherwise.

Tbh if I had 3-4 straight losses on the same pair (stop fully hit) using my swing trade edge/technique something would be very strange in the universe but I'd just plod on..

5-6 losses on the trot, when I was playing off the 3 min tf's, was quite common, but never full stop being hit..

But yeah, you're dead right, you have to be match hardened, the only way that can happen is with experience..

 

[bedsit]

I blame ABBA...

Always sunny in the richman's world:!: - the ozone layer is thinner than it used to be. No good any more.

Agree with Swan.