What happen if you break your rules and it turns out profitable? Somehow this will reinforce me to break rules the next time I broke one of my rules yesterday to buy premarket, and result in a big loss, but because i have previous recent experience of buying premarket and result in a big profit, and now the loss is even bigger than my previous profit So somehow it is so difficult to manage when it comes to trading, you know you are breaking the rules, yet you have some recent experiences of breaking rules and result is profitable, and you go ahead and buy, and turn out big loss So should stick with the rules no matter wat??? What happen if stick with the rules and i do not buy, but the trade turn out that i miss the big profit later, how to manage the disappointment?
If you are using discretionary trades, it is best to have lax rules imo. Having too many steadfast rules is impossible to follow and causes unnecessary stress. The only concrete rules should be those for managing risk. If you have some system or signals, stick to the rules. Opportunity comes at different times, so if you happen to be at the computer and see something, take the trade or don't watch the market before you want to trade it.
First off, how far back did you backtest? What were the biggest drawdowns? Biggest new equity highs before drawdown You want to know every single possible stat as possible so you know what to expect. Losing days will generally for me will be larger than the most winniest of days unless you have a loss max in place of your rules, I don't. It is going to take you awhile before you stop doing "innoves" trades, and after a year, hopefully, you will find 95% of them are losers. At some point, you will throw your hands straight up and say "screw it' these are costing way too much money. What is the sense of having rules if you not going to use them? So what you miss a move, I watch screwy market all day long make moves and I am sitting on my hands or playing with my Yo-yo, whichever yo-yo, I am a yo-yo anyway. You have to trade like you don't need the money, sometimes this helps to stay true.
If you make money violating your rules, consider some kind of penalty such as having to donate half the profit to a politician which you hate (e.g., Obama if you're Republican, Romney if Democrat).
Maybe the rules are bad. Maybe you need to change the rules. For example, a guy makes a rule: Never trade at closing. But some guys make tons of money at closing. Is the rule good? Maybe not.
================ In vest; Probably the most helpful thing for you is rule of 72; work 12 hours a day 6 days a week. 7 years of that may help you ;get some battle tested principles/plan. I wouldnt consider a rule of stop trading after making some profit; to be any help @ all.So feel free to break that ''rule'' all the time'' Now break a school zone speed limit or position size rule; both a policeman & the law of averages will punish you. In other words you work /read/study enough to get some good principles/rules; the temptation for stupidity is not quite so hurtfu/harmful.
One way of making rules is by p/l analysis of their effect on your account during past market behavior. If the market has changed, rules may need to be changed. If the market has not changed but you have, same. If the market has not changed and neither have you, perhaps it's not the rules you're trying to break. Perhaps it is you. :eek:
A good trade is one where you followed your rules, whether you made money or not. Profit is the byproduct of following the rules of a sound plan. If you broke the rules and made money, it was still a bad trade. It will catch up with you eventually.