Consequences for not following your trading rules

All traders, myself included, have experienced the frustration of entering trades that don't align with our established rules and strategies that we say to ourselves that we will follow. It's a common struggle, certainly was for me, but it's essential to develop a system that effectively prevents this detrimental behavior.

One effective method is to create clear consequences for deviating from your trading plan. For example, you can track the value of losses incurred from taking trades outside your plan and commit to making a corresponding charity donation at the end of each month. I committed to this as my personal consequence and even keep a ledger of these charity payments. This type of consequence holds me accountable for my actions and adds a tangible cost to each deviation from my plan, reinforcing the importance of discipline. Maintaining discipline is critical if we are to succeed.

Every trader is unique, so it's crucial to identify deterrents that resonate with you personally. If financial penalties aren't motivating enough like they are for me, consider implementing deterrents related to your hobbies or interests. For instance, if you enjoy playing golf, make a commitment to skip your next golf outing following a deviation from your trading plan. By tying consequences to activities you enjoy, you create a powerful incentive to adhere to your plan.

Trading isn't just a hobby; it's a business, and like any business, profitability depends on minimizing costs. Deviations from your trading plan represent unnecessary costs that erode your bottom line. Just as business owners seek to increase profitability by cutting expenses, traders must cut losses incurred from off-plan trades to maximize their overall profitability.

It's essential to approach mistakes with a growth mindset. Just like children learn from their mistakes, we traders can grow and improve by analyzing our errors and identify areas for improvement. Rather than dwelling on our losses, let’s view them as valuable learning experiences that contribute to our long-term success as a trader.

Remember that a trading plan is a dynamic document that should evolve over time and we are always looking for ways to maximise our profitability. Devising a consequences strategy in trading allows you to relook at those rules once again and refine them even further.

Preventing yourself from taking trades outside your plan requires discipline, accountability, and personalized deterrents. By establishing clear consequences, treating trading like a business, and embracing mistakes as learning opportunities, you can enhance your trading discipline and increase your overall profitability.

This will not be easy but what do you have to lose by adding this into your bag of trading tricks? The more we can discipline ourselves the better we become as humans in other aspects of our life.

Committing to following our own rules and having high standards for ourselves can make us better in so many other parts of life. It can make us more reliable and disciplined in terms of anything we do. I am not a full-time trader yet but I do know one thing, if I don’t follow my own set rules I will fail. In a business where following rules are critical to deciding whether you will be successful, I actually don’t deserve the benefits only reserved for the top 10% of traders if I keep breaking promises to myself!

Trade Clearly!