If you are a discretionary trader like me, there is always the possibility to deviate from your strategy. Some of those deviations might be small and they might be “forgiven” because they are still within the boundaries of your trading strategy. Other times you will deviate entirely from your strategy. Ultimately those deviations, whether big or small, can cost you.
What causes traders to deviate from their strategy?
- Greed.
- Fear of missing out (FOMO).
- Revenge trading.
- Overtrading.
- Lack of patience and discipline.
- Frustration.
- Falling for other people’s opinions.
- Trading from social media.
- Forcing trades.
- Ego.
How can it cost you?
When you are in a trade where you’ve deviated from your strategy, you won’t have the same conviction as with those trades where you followed your trading plan to the T. Because of this, chances are that you will be doubting the trade and yourself for the duration of the trade.
If such a trade ends up a winner…is it really that good a thing (other than for your account balance)? But what if it’s a loser? Or worse, what if you have two or three losses in a row?
That’s when negativity can start setting in because you know you never should have taken those trades. That’s when you start blaming yourself, the people you followed or the market. And it’s at that point when a trade perfectly sets up according to your trading plan, but you don’t take it.
Why? Because you are too negative, because you doubt your ability as a trader, because you decided to take a break, because you can’t take any more losses. And that’s the trade you actually should’ve taken. All you needed to do was wait patiently for your setup, take the trade and be at peace with the outcome. And whether win or loss, all that matters is that you’ve followed your plan.
The point I’m trying to make is that by deviating from your strategy:
- The winners might be helping your account balance, but not your development as a trader.
- Chances are you won’t have great conviction in such a trade because it’s not planned according to your rules. Little conviction also means doubt, which will interfere with trade management.
- Such open trades (especially if they are in the red) can cause you to miss / skip trades that are actually within the rules of your trading plan.
- If such trades end up as losers, their impact can be very negative on you. This also may result in you skipping trades that are actually within the rules of your trading plan.
What can follow from the above? Traders (especially beginners) are starting to look for a new strategy, claiming the current one is not working. The funny part? They never executed their strategy 100%, they deviated, they took suboptimal trades, or they listened to other people.
If you can’t follow the rules of your current strategy, what makes you think you can follow them with another one?
Thanks so much for reading. Hope you enjoyed this post. I hope you and your loved ones are well and safe.
Thanks and Regards,
Trading SOS SOS