Turning Rules into Good Habits

In trading, greed can sometimes get the best of you. In your journey to be a consistently profitable trader, the urge to bag those extra pips can be too irresistible. As a result, you sometimes force your trades.

During losing streaks, your frustration and need to enter more trades to earn lost money can overwhelm rational thinking. This line of thinking may actually make a lot of sense to you because it’s not like you can make money if you don’t have a trade on, right? Instead of being patient by waiting for the best setups and letting the market come to you, you… well, force a trade.

Take a look at Paolo, an intermediate trader from MeetPips.com, who lost a trade by forcing it.

Right off the bat he realized that he lost because he forced trades. He took trades that didn’t follow the rules of his system and got burned for it.

There’s also Ikori. In his post, Ikori touches upon how the perils of impatience has affected his trading, resulting in a blown account.

Fortunately, there is a way to overcome these destructive urges. It requires discipline and dedication in the beginning, but it definitely pays off in the end. A way to get over the impulse of forcing trades is by making your trading rules your habits.

Just like how your mom made you put your dirty clothes in the laundry basket to keep your room clean, you start forming good habits by consciously repeating an action. Whether it is by saying “no” to that second doughnut, going to the gym twice a week, or something as simple as eating breakfast in the morning, habits start with deliberate repetition until the act becomes a part of you that you no longer need to be reminded of the rules.

In trading, consciously sticking to your trading rules is a solid step towards forming good trading habits. After practicing your trading rules over and over, you will notice that you have more control over your trading. You may still experience anxiety over price action, but you will control your decisions better because you stress less over it.

Here are a few things you can do to help turn rules into habits:

1. Make a list of rules and write them down.

The first thing you should do is to make a list of trading rules. These rules will govern how you trade, where you will enter, exit, and how much you will risk. It also isn’t enough to just have these rules in your head – you should write them down. Writing down your rules solidifies and reinforces them as you will always be reminded what they are.

2. Visualization

Imagine that you have an open position. Think of all the different price action scenarios you could encounter and imagine how you would adjust your position in these situations. Visualize yourself following your rules. The more you practice and repeat this process, the more natural it becomes for you to follow your rules and turn them into habits in a real trade.

3. Review your trading

At the end of each trading day, take some time to review your trading. Ask yourself, “Did I follow all my trading rules?” Grade yourself and make it a point to work on your weaknesses. By reviewing your trading, you can see whether your rules are effective and whether you are really following them or just fooling yourself.

Always remember that good trading decisions begin with good trading habits. Doing something well once doesn’t automatically make you a good trader. It is the constant repetition of the act that will play a major factor in making you a better trader.

As the wise Aristotle once said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.”

  • bighappyworld

    Trading rules can define entries, exits and any part of the trading process.

    If you find yourself struggling with rules, you can use EAs/Scripts with MT4 to help regulate yourself.

    I myself don’t like to sit at the computer waiting for the right condition to exit the trade. I get impatient. But I like to be there when I actually enter the trade.

    To do this, I write an EA that defines an exit rule. For example, after 50 pips sell half and set the stop loss to just above break even. Then attach a trailing stop to the remaining half.

    For the entry, I use a script that attaches a particular magic number to the trade when opening the order. The EA then looks for orders with the right magic number/trade symbol combination to for the exit rule.

    You can perform this same type of logic on any trade rule. It isn’t designed to backtest or to use in simulation. It is just designed to keep you honest with your rules.

  • bighappyworld

    Trading rules can define entries, exits and any part of the trading process.

    If you find yourself struggling with rules, you can use EAs/Scripts with MT4 to help regulate yourself.

    I myself don’t like to sit at the computer waiting for the right condition to exit the trade. I get impatient. But I like to be there when I actually enter the trade.

    To do this, I write an EA that defines an exit rule. For example, after 50 pips sell half and set the stop loss to just above break even. Then attach a trailing stop to the remaining half.

    For the entry, I use a script that attaches a particular magic number to the trade when opening the order. The EA then looks for orders with the right magic number/trade symbol combination to for the exit rule.

    You can perform this same type of logic on any trade rule. It isn’t designed to backtest or to use in simulation. It is just designed to keep you honest with your rules.

  • Kleptn

    Creaing a list of trading rules should definetly define the specifics on how and when to act in the market, as you greatly describes in the above.

    One should also be aware of the psychology of it all, and be open to how your feelings and emotions come into play in the game. I feel that the trading rules should include the more ‘soft rules’ as to when to monitor the market, and when to have leisure time.

    I have recently started forex trading, and the system specifics is not the hard ones – it is all that comes inbetween. Due to this I have started blogging about this in order to help myself in constraining the psychological aspect of it.

  • Kleptn

    Creaing a list of trading rules should definetly define the specifics on how and when to act in the market, as you greatly describes in the above.

    One should also be aware of the psychology of it all, and be open to how your feelings and emotions come into play in the game. I feel that the trading rules should include the more ‘soft rules’ as to when to monitor the market, and when to have leisure time.

    I have recently started forex trading, and the system specifics is not the hard ones – it is all that comes inbetween. Due to this I have started blogging about this in order to help myself in constraining the psychological aspect of it.

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