How To Follow Your Trading Rules in 2022

By Yvan


I hope 2021 was a positive year for you on the trading front. My own trading results vary a lot from year to year. Some years I’m profitable, some years I’m not. Even when I follow my trading rules to a T. Such is the nature of trading.

For me, 2021 was nothing to brag about. I didn’t press too much since I had an absolutely phenomenal performance in 2020. I wanted to take it easy, especially since stocks felt a little toppy for me.

But 2021’s market conditions were very forgiving and the market gods have been throwing bones at the disciplined and the undisciplined alike. So, if you haven’t made any money in 2021, it’s too bad because opportunities were not lacking.

That being said, know that there will always be opportunities. Human behavior changes over time, but not human nature. That’s why you see—and will continue to see—financially exploitable patterns in the markets.

Now, whether you made money or not in 2021, it’s important to remain humble, recalibrate your mindset, and renew your commitment to your trading plan in 2022.

Here’s what I suggest you do.

Two Steps…

First, recognize that the nature of the market makes trading an emotionally charged game by default.

Emotions never go away. Over time, and with experience, we just learn not to let them fuel irrational decisions.

Second, acknowledge that your emotional states do not need to match your trading rules. This is very important… you don’t have to always feel good about following your trading rules. It’s not necessarily meant to be a “feel good” thing.

There’s a reason why following your rules/plan doesn’t feel good: those things give structure to your behavior, and your mind doesn’t like that. Your mind is like a wild animal and likes to do what it wants.

I mean, who likes rules? Rules are hard to abide by, especially one’s own rules. If you’ve ever tried a strict diet, you know what I’m talking about.

So, it takes a special kind of courage to still choose to follow your trading rules, amidst the discomforts. And mindfulness can help you access and grow that courage.

Infusing Mindfulness into Your Trading Process

The idea of sticking with your trading rules despite the discomforts is that you need to feel worse before you can feel better. In other words, you need to go through the pain of following your trading rules in the present, so that you can enjoy consistent profitability in the future.

This is not an easy and comfortable process. Again, it’s hard. From an early age, we learn to stay away from pain and discomfort. But the thing is, pain and discomfort aren’t always bad, and you can learn to overcome the toxic conditioning of automatically thinking that they are bad by willingly opening up to how you feel.

This is where mindfulness can help. Mindfulness is simply being aware of what is happening right now without wishing it were different. It’s enjoying the pleasant without holding on when it changes (which it will); it’s being with the unpleasant without fearing it will always be this way (which it won’t).

In that sense, mindfulness is said to not solve your problems, but rather dis-solve them, which is a rather poetic way of saying that it can help you see through your discomforts.

By cultivating such a skillful perspective on so-called negative emotions, one can learn to reframe and reinterpret them as just neutral, non-dual information arising and passing.

Armed with this new perspective, you can then learn to act in the market with a greater degree of objectivity, and the unpleasant emotions that arise in relation to following your trading rules will no longer hold such power over you.

Last Few Words

Before I end this short post, I want to leave you with two things.

First, a quote from famous German philosopher, Nietzsche:

If you are unwilling to endure your own suffering even for an hour, and continually forestall all possible misfortune, if you regard as deserving of annihilation any suffering, and pain generally as evil, as detestable, and as blots on existence, well, you have then, besides your religion of compassion, yet another religion in your heart (and this is perhaps the mother of the former) –the religion of smug ease. Ah, how little you know of the happiness of man, you comfortable and good-natured ones! For happiness and misfortune are brother and sister, and twins, who grow tall together, or, as with you, remain small together!

All Nietzsche is saying is that you need to keep pushing your own boundaries even if it means that you have to suffer pain and discomfort in the process. That’s the only way to grow. Clinging to comfort is one of the worst things you can ever do because “happiness and misfortune are brother and sister, and twins, who grow tall together, or […] remain small together!”

Second, an action step:

When placing and/or managing your trades, make sure you have a clear idea of the kind of emotion you’re experiencing. Then set an implementation intention by repeating the following: “I will not blindly react to [fear, anger, greed… name the emotion]. Instead, I will use it as a cue to redirect my attention to my trading plan.”

Wishing you a profitable week,

 

—-

Memorable Lines From This Post

Human behavior changes over time, but not human nature. That’s why you see—and will continue to see—financially exploitable patterns in the markets.

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The market makes trading an emotionally charged game by default. Emotions never go away. Over time, and with experience, we just learn not to let them fuel irrational decisions.

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 Your emotional states do not need to match your trading rules [...] you don’t have to always feel good about following your trading rules. It’s not necessarily meant to be a “feel good” thing.

Click to Tweet

 Your emotional states do not need to match your trading rules [...] you don’t have to always feel good about following your trading rules. It’s not necessarily meant to be a “feel good” thing.

Click to Tweet

Mindfulness is said to not solve your problems, but rather dis-solve them, which is a rather poetic way of saying that it can help you see through your discomforts.

Click to Tweet

Mindfulness is said to not solve your problems, but rather dis-solve them, which is a rather poetic way of saying that it can help you see through your discomforts.

Click to Tweet

"Happiness and misfortune are brother and sister, and twins, who grow tall together, or [...] remain small together!" ~ Nietzsche

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