Why you do not follow your trading system

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Why you do not follow your trading system?

We often hear how important to adhere the trading system to turn profit.
To create trading system is only half the battle, but to act strictly adhering to the chosen system – a task more difficult.

Today we try to understand why most traders do not follow the plan they had chosen.
One of the most common reasons why traders are not able to stick their trading system are unexpected events. Yes, there are times when market moves exactly as described in the tutorial, and you can use the situation to 100% and get maximum profit. But more often market does not move exactly as you expected.
When something unexpected happens, this drives some traders to panic and move them out of balance. They lose their composure and begin to act impulsively. And usually they make something that does not correspond to the plan.

To avoid such impulsive behavior, it is necessary to take into account all potentially possible scenarios, even before you enter the market. You must have a plan how to act in any situation (off the Internet, unexpected news of that may significantly change the market movement). So nothing unexpected can happen, and you will know how to react in this situation. There will be no panic.

Another case when trader can step back from the chosen plan – a series of successful deals. In such situation a trader can relax too much, begin to consider himself a king of the market and simply lose the ability to distinguish the signals. After a series of successful deals, you can begin to feel yourself too self-confident and open positions that do not correspond to your initial trading system. Also negative effect can have a series of losing deals.
Under the impact of losses the mental mechanisms begin affect on the trader to protect him from the psychic pain. And here can appear situation when a trader begins misunderstood signals.
And as a consequence, not only to join in the obviously unprofitable deal, but do not notice the clearly profitable one.
To deal with all these situations and associated emotions, you should to keep a psychological diary. Its meaning is that you get used to pay attention to your mental state and use it in the analysis of your trading. Of course it’s better to do this every day after your trading. The basic idea is that it will remind you that your plan is based on clear rules. And you will always see the which risks brings your deviation from the plan.

Another problem is the lack of confidence in the trading system. The significance of this problem is that trader starts to think that following a system is not mandatory. And sometimes he thinks that it’s not always going to work if he follow the plan. This causes the trader start to select positions under the influence of emotions and use only a part of the system. Trader begins to discard signals which he does not “feel”. And now, following a plan becomes completely
unnecessary.
In the long term this means a loss of all sense of the trading system. And without a system you get, at best minimal profit. At worst, it brings you huge lost.

One of the way to avoid this is to keep trading diary and analysis of statistics. It is hard to argue with statistics that monitors all accurately. And when it will be clear that the trading system actually works and brings positive results, there will be the motivation to continue follow the trading system.
For the same reason it is useful to test your system on the history of deals. Through such analysis, we can quite quickly verify our trading strategy over a long period. This adds our system more credibility.

The next problem is discrepancy between the trading plan and the type of personality.
Sometimes it may happen that you will feel the need to enter the market, simply because the trading system requires it. Or you can commit less deals, because your lifestyle does not allow you more. This can lead you to inconsistency and confusion in the work, because you will stick to the rules only occasionally.
This will ruin the results as a whole. And you again wonder whether your system is suitable for you. In other words, whether your system is suitable to your plan?
Maybe you use a moving average, and you ought to trade with the trend. Or you focus on intraday trading, but your calling is long-term trading. You need to understand the feature and adjust your plan to it. As soon you introduce your trading system according to your nature, you will do the next step on the path to successful trading.

In conclusion we should say that for following a plan for a long time, you need much more than just discipline. You must to be sure that the plan is right for you, fits your character, takes into account all possible scenarios and confirmed by statistics.

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