Why have a trading system if you’re not going to stick to it?

It’s a perfectly reasonable question. And makes perfect sense. Why bother back testing it, learning it and trading it, if in a few days’ time you’ll trade ‘off system’?

Here are 3 common ways many traders trade ‘off system’. There are plenty more, but we’ll stick with 3 today.

  1. They take extra trades they shouldn’t.

There’s a couple of reasons for this. They assume they are missing out on something big and want to trade everything so not to miss it.

Secondly, many traders crave action. They look at their portfolio and want instant results.

  1. They exceed their position sizing

This is often caused by laziness and not being bothered to do the math’s properly, but can also be because the trader has shoe-horned the trade into their portfolio. They’ve exceeded their max risk just this once. Only the odds are 60-80% that it’ll be a losing trade, so all you are doing is allowing your losers to be bigger than they need to be. Guess what the outcome of that is going to be?

  1. They hear something about a stock/market and execute upon it

We’ve all done this before. Reading Twitter, the news and certain traders I respected and followed at the time would tweet about how Gold was destined for a crash. Only I was LONG. My trade was in profit too. Now not only am I having to cope with the normal inclination to want to bank my profits, but that’s just been exacerbated by reading that news. Now I definitely want to bank it. Only I’m trading what I think, not what I see. I’m allowing outside predictions on an unpredictable market influence my decisions. Which is insane. Fear controls everyone. We are so scared of what “MIGHT” happen.

Of course, you don’t need to be a rocket scientist to understand that in order to be a better and more disciplined trader you need to do the opposite to the above.

  • Accept that other markets you are not trading will trend and do well. You can’t trade everything. Be content with missing out. Its part of the game. But it also means that there’s a lot of opportunities. Lots of chances to pick a winning trade on your next pick.
  • Never exceed position sizing. This is paramount. Never put more risk on one trade. The odds are against you if most of your trades are losers. Be smart.
  • Don’t listen to outside opinion. They might be trading 10 min charts for all you know. Or approaching the market in an entirely different way. They also cannot read the future. No one can. Best way to deal with this outside noise is not to see it in the first place. Cut yourself off, and read “How I Made $2 Million on the Stockmarket” by Nick Darvas for inspiration on this.

Alternatively you could opt for a fully automated system which removes all of the above, trades 24×5 – no emotion, risk and opportunity taken care of. Acorn underlines this approach with verified results, month on month. Join us to start increasing your profits with minimal risk.