what makes you break your rules

For those of us who don't have an automated system that "pulls out" $1000 from the market every day like clockwork, this question is for you: why do you break your rules?

Whatever the rule might be - a stop loss, sticking to specific set ups, never messing with the automated system, etc - what makes you break those rules?

For myself, I've found that I've pulled a stop on a position if the position was initially profitable. That initial success with the position is a trap and then I fail to take the loss, leading to a larger loss.

But like I said, for the power traders who never make mistakes, Lescor's thread is for you. He's got the secret sauce you're looking for. Just PM him.

 

automated traders can still break rules.

can change the system parameters for no good reason between trades or turn the automation off completely during a drawdown etc.


There are many reasons to break rules, but the most common are either fear or greed or lack of discipline.

 

Because I lacked the understanding..., respect..., and appreciation of how..., on average..., my rules saves my ass

Because I lack a respect an understanding of how – the mkt can do any damn thing it wants – any time it wants – for as long as it wants

Because I easily forgot – that no matter how many wins in a row – it don’t mean shit regarding the next trade

Now, once my shortsightedness/ ignorance evaporated/ was beaten out of me – I love my rules

In fact not following my rules causes me discomfort – seriously..., it does. Furthermore my rules are the only certainty..., I have..., when I'm trading



Any trader who can't follow their rules..., is woefully under educated in the way of the mkt - period

RN

 

You've got to have respect, or else you'll start to think "this is easy money." And then you break the rules.

Good point about breaking rules after a win streak. That's a universal tendency, I think.

(As for automated systems, read the whole OP).

 

Precisely.

I would also like to add that if a person has stuff in the subconscious mind that goes against his/hers conscious interest, there is absolutely nothing in the world that can be done to win consistently,

Until the issue(s) are resolved, i.e. the sub is reprogrammed....the sub will always win.

 

I was breaking my rules before having a thoroughly backtested trading plan: I didn't have confidence in it, nor in myself, and I was doubly right

When I realized what the issue was, I started working at backtesting my trading plan, which soon lead me to developing automated systems.

But the first few of these, I was still interfering with the system ... I still didn't have enough faith in those systems, and I can now safely say that was because of over-fitting those systems on a too small backtesting period & number of trades (a few hundred).

Then I developed a couple systems with enough trades in backtest to really get confidence in the long-term outcome, and I started to work on myself so to *not* interfere anymore.

 

No truer words have ever been spoken



RN

 

Believe it or not, this is the most important thread to ever appear on ET. If you can figure out why you break rules, and then fix that problem, you will have solved 90% of the puzzle. The other 10% is the secret sauce/holy grail. Just PM your favorite guru for that.

So without further fanfare, the list of reasons why traders break rules:

a) boredom/excitement
b) lack of preparation, leading to selecting substandard set-ups
c) I'm just going to break the rules this one time, combined with
d) I've to get back to even syndrome
e) complacency, often after string of success
f) need to be right and failure to acknowledge mistakes, combined with
g) got to make it back the way I lost it syndrome, leading to
h) avalanche scenario: one mistake leading to another (bad trade + double down)

The ultimate causes way be more subliminal. Maybe there is a lack of conviction in the rules, and in your own trading ability. If you adopt hope as a strategy (sure, the chart looks horrible, I'm already down, I would never be able to explain this position to anybody else, but if it will just bounce 5% I can get back to even), ultimately you're hoping that some outside force or random luck will bail you out of your bad decisions. But if you do have conviction in your ability to take losses and make them back through sound trading, you won't find yourself in avalanche scenario.

 

Think about the psychology of the degenerate gambler (anybody see the Intervention episode with Gabe, the gambling addict?) The degen knows the odds are against him. He's chosen a game in which he has no control over the outcome, and the odds are against him. He prefers that scenario to the alternative.

Edit: I think the definition of "rules" should be any set of strategies which has positive expectancy. In that case, breaking rules consists of taking positions which do not have positive expectancy.

 

ditto.