Wednesday, November 29, 2017

Stop Forcing Trades | Trading Psychology

Today’s trading psychology question of the day…

“I can’t seem to stay patient long enough to wait for the best trading opportunities.  I know my strategy works because when I use the rules I usually make money, but I just can’t seem to stay patient, and I wind up forcing the situation, which usually ends up in a loss.  Do you have any suggestions on how to stop trying to force the market each day?”

Great question, and certainly an obstacle that I had to overcome, and im sure most traders battle as well.

How do we stay patient for the best trades?  How do we stop forcing trades?

First of all, just so everyone’s on the same page, the word “forcing” trades can be associated with a few different scenarios…

·        Taking trades that don’t fit your rules
·        Taking too many trades (over-trading)
·        Taking trades with too big of a position size (trying to get rich on each trade, forcing too much) 

This is the opposite of what successful traders do.  Successful traders wait for the moment when the odds are in their favor and when they have a statistical edge over the opposite side of the market. 

In other words, the best traders wait for the market to come to them, rather than chasing the market.

Forcing trades is the exact opposite… you’re trying to make the market bend to your will.

The most common offenders of this are people who are extremely competitive and driven to succeed. 

They almost hate losing more than they like winning!  They would rather trade incorrectly to try and make money, than to do their jobs correctly and make CONSISTANT money.

The most common reasons why people force trades is because of their trading performance.  They have either taken some recent losses, or they aren’t trading as often as they want, or maybe they’ve missed some recent opportunities.

In my experience, my biggest frustration with forcing trades comes from anticipating something before it happens. 

In other words, I’m trying to lead the market, when in reality, the only way to be successful in trading over the long-run is to let the market lead me, so I can follow…. The old saying… “we want to be the fly on the back of the elephant, just along for the ride” seems to be very accurate on this issue.

No matter what the reason for this “over trading” problem is, the end result is almost always the same…

…we force trades, try to make something out of nothing, and in the end, we usually put ourselves further from our goals than when we started… and we look in the mirror at the end of the day and it’s like someone ELSE was in control of your mouse, and was forcing you to push the buttons.

And that’s the big challenge for us traders…

Being a successful trader requires us to control our wants and desires, control our aggression, which becomes very challenging when the price-action is moving quickly and there’s money on the line.

The most important piece of this puzzle is to clearly define specific situations where the market offers a reliable opportunity, and having the patience to wait for that moment to occur.

The most effective way to resolve this problem (forcing trades) is to use specific rules, as part of your trading strategy.

When we force a trade, we’re putting our desire to make money ahead of our desire to follow our rules.

Most importantly, when we consistently use rules, our actions become easier each time, and they soon become a habit, and those habits are hard to break, and they help us achieve long-term success.

In other words, the correct trading rules, become the correct trading actions, and when used consistently, those actions become long-term habits, which is important because habits don’t require much effort and they allow our brain to focus on new and more important challenges in the future.

But wait a second…using rules isn’t the end-all solution…

The challenge comes when we try to FORCE ourselves to follow the rules each time… it’s exhausting, and it takes our attention away from trading, and places the focus on the rules.

Our job then, as traders, is to learn how to automate the consistent use of our rules, so that we can avoid the common mistakes we make as traders, such as forcing a trade, which often results in a loss.

Automate Your Use of Rules:

So, how do we make following our rules easier?  Less energy-consuming?  automatic?  It’s simple…thru repetition.

Just like you learned how to tie your shoes when you were a child… you learned the technique, you did it every day, and eventually, tying your shoes became an activity that you could do in your sleep.  It became a habit that takes almost no energy or mental-capital, and that habit is most likely still with you to this day.

5 Ways to Create a Habit:

To make it easier for you to follow your rules, which will make it easier for you to resist the temptation to force trades, here are five simple ways to create a habit of following your rules.

(#1) - Write Down Your Rules in Proper Order

First, take a moment to write down your most important trading rules. 

These rules should include everything you use to make a trading decision:  trend, set-up, risk, reward, position-size, trigger, etc.

Keep in mind, a professional trading plan (like the one I provide to my clients) will include much more than just these basic entry rules I’ve listed here, but that will get you started.

I would also recommend you put them in order of how a trade develops, and what you need to look at first, and what you need to look at last.

For example, my entry rules start with things like “follow the trend” and they end with things like “use the proper signal candle.”

Does that make sense?  My goal is to list my entry rules in the order in which I will use them.

My first rule is very broad, such as to follow the trend, and my last rule is more specific, such as to confirm the entry with the proper signal candle.

I don’t want to worry about the signal candle rule at the beginning of the set-up, I want to save that rule until the end, when it’s relevant to my trading decision.

(#2) - Review Your Rules Before You Begin Trading

The second step is to create a daily routine that has you reading your rules before you begin trading.

I have to admit, I’m guilty of this one.  I live on the west coast, the opening-bell is early for me, and sometimes I just don’t want to take the time to review my rules before I trade… I get it… but if you’re having trouble following your rules, this is Non-negotiable.  Get to your desk earlier and budget an extra 10 minutes each morning to reviewing your rules.

It also helps to visualize yourself following your rules. 

Visualize yourself staying away from those counter-trend patterns, visualize yourself waiting for the proper set-up, visualize yourself staying patient for the proper signal candle, and managing the trade correctly once you’re in the trade.

By reading your rules and using visualization before you begin trading, you’re going to have a much better chance at creating habits with those rules over the long-term.

#3 - Take Frequent Breaks to Read Your Rules

The third piece of this strategy on how to avoid forcing trades….

One of the things I tell my clients every day is that following rules is easy, but we struggle to follow those rules for an extended period of time. 

Anyone can follow rules for 20minutes, but can you keep the same discipline over 2 hours?  That’s one of the clearest differences between a rookie and a professional.

For example, I find it easy to be strict with my rules until about 10:00am EST, then it becomes harder to remember the rules, and it becomes more of a labor to use them, and psychologically, as you get tired later in the day, you let your guard down, you lose focus, and you’re more susceptible to making mental mistakes when the markets move quickly or unexpectedly.

For this reason, I would advise you to take strategic breaks from trading to read your rules and do your visualization routine.

Everyone is different, but I would imagine that some traders need to do this every 20-minutes, and some people would be ok with every 2 hours.

If you’re having a hard time remembering your rules, I would also encourage you to add meditation into your daily routine.  As I’ve said in previous lessons, meditation trains your mind to be more patient, it lengthens the amount of time before you allow emotions to trade for you, and it will also help anyone who is struggling with remembering rules after an hour of trading.

#4 - End of Day - Review Your Trades & Keep Score

The fourth piece of this strategy to avoid forcing trades…

At the end of your day, take the time to review each of your trades and compare them to your rules, using a grading system to keep score.

For example, if you have 5 entry rules before you take a trade, each of those rules serves as 1-point.  If you followed each of those rules when you enter your first trade, you would receive a grade of 5.  If you only followed 3 out of your 5 rules on your next trade, that grade would only be a 3.

Now, total all of your scores at the end of the day, and that final number is what you want to do better than tomorrow.

This takes time invested and honesty with yourself, but it will give you an easy way to measure your success (or failure) in following your rules for that day, so that you can continue to improve.

#5 – Add Social Pressure

And the final, fifth aspect of this strategy to stop forcing trades…

As I’ve said in previous lessons, social pressure is one of the strongest forces we can use to create positive change in our lives.

Simply put, when we tell someone that we are going to do something, we then feel pressure to deliver on those promises.  This pressure is even stronger when that person is someone who you admire and respect.

The final step in creating a habit is to ask someone to be your accountability partner.  That is, find someone who you admire, and ask them to help hold you accountable with following your rules.

I remember when I was a new trader, I asked my wife Megan to be my accountability partner.  I would finish my day, tally up all my points, and bring my journal to the dinner table, where she would hold me accountable for following my rules. 

Needless to say, I struggled at first like everyone does, but it didn’t take me long before I was following my rules because of the power of social pressure.  It was easier to follow my rules each day, then have to look my wife in the eye and make excuses at dinner. If you’ve worked with my wife Megan, you know exactly what im talking about, haha.


Boy… we’ve covered a lot in this psychology lesson, so let’s do a quick recap…

If you’re like most traders and you struggle with trying to force trades, the key is to create a habit of following your specific trading rules…

…and today I gave you guys five (5) steps to creating a habit of following your rules.

1.      Write down the most important rules, prioritized by when they will be used
2.      Invest the time to read your rules before you trade, using visualization
3.      Take strategic breaks throughout the day to read and visualize your rules again
4.      Create a grading system, so that you can see how well you’re following your rules
5.      Use an accountability partner (social pressure) to incentivize the situation

One last thing…

It’s important to remember that long-term change doesn’t happen overnight, and you can’t change everything at the same time.

This is going to take time, and you will find it easier to follow some rules more than other rules, so stay committed and focus on correcting one or two mistakes each week.

And as you’ve probably heard me say before… “be firm in your long-term goals, but be flexible in your short-term approach.”

This means, have a clear vision of where you’re going, but remember that there will be bumps and bruises along the way, but you can’t let those small obstacles prevent you from achieving your dreams, so invest the time, don’t give up, and use these five steps to avoid forcing those trades next time.

Guys… I hope you found a ton of value in today’s trading psychology lesson…

…and I would love to hear from you about additional topics that you’re struggling with as traders.

Do me a favor…drop me a comment below this video with any topics you’d like to see me cover in my next psychology video…

…make sure to give me a thumbs-up if you found value, subscribe to the channel if you’re not already, and please don’t forget to share this video with a friend who can benefit from this information as well.

Guys…It doesn’t matter what market we trade, or the strategy we use, even the most experienced & successful traders battle with their emotions when there’s money on the line.

And don’t forget, you can find me every morning @ 8:00am EST working hard in my trade room with all of our members here at, I have a great free trial on the homepage of our website, I publish my Nightly Newsletter every evening on my blog before 8:00pm EST, and I’m excited to see you again soon on my next trading psychology lesson.

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