A trader breaks down the financial cost of breaking your own rules. When you skip your system, you're not just losing on one trade, you're losing the compounding gains from staying disciplined over time.
Okay, so how much is it worth in dollars to fix your discipline issues? I mean, really, how much does it wind up costing you when you can't stick to your rules? Well, it's important for you to know because denial doesn't benefit you. It really doesn't. Only by knowing the truth will you be empowered to take action and address it. Now, there are two ways to put a number to it so that you actually know. The first is pretty accurate, but it takes a lot of work. You can track all your trades, calculate how much each deviation every time you mess up, you don't follow your rules, you how much it costs you on every trade, and then add them up at the end of the month or the year, and that will give you a pretty direct number. Or if you want to know right now, here's a real simple method to know. And it's pretty accurate too. Take the expectancy or average return per trade for your system. So, for example, let's say you back tested your system or method and found that the average return per trade is $150. You multiply that by the number of trades you place in a given month. Again, for example, if you're placing one trade per day, that's 20 trades a month. We'll just use 20 to keep the math simple. So the product of those two numbers is how much you should be making each month if you're staying disciplined and sticking to your system. So this means that your trading should be producing $150 per trade, 20 trades per month. Well, 150 times 20, that's $3,000 per month. So now what you want to do is take how much you're actually making each month and subtract it from that amount that you should make. And the difference is how much it's actually costing you to not stay disciplined. So again, in our example, let's say if you're able to make $500 a month while you're trading, you feel pretty good, you got profitable, you're making $500 a month. So if we take the $3,000 you're trading, should be producing and subtract what you've actually been getting, well, it's $3,000 minus the $500 that you've actually been making. Well, that difference is $2,500. So that means that not sticking to your rules is actually costing you $2,500 a month or $30,000 a year, which is 12 times $2,500. Now, again, this is not intended to upset you or make you Feel bad. It's so that you can know the truth about your trading and take action to make things better. Okay, so what should you do if you're not happy with how much it's costing you to not be well disciplined? Well, first thing is, if you have a good system, one that you know works, but you're losing money every month because you just can't stick to it, first thing to do is stop trading with real money, get over to a SIM account, but stop trading with real money. At least until you get this under control. There's just no point in continuing to lose money. There's not. Second, understand that sticking to your rules and consistently being more disciplined in your trading is about more than just willpower. Which is good news because as we've all experienced at one point or another, willpower is just not a sustainable approach to anything. Take a look at New Year's resolutions. No, it's not that you have a bunch of psychological problems or mummy daddy issues and it's going to take a year on a therapist's couch. Discipline can be made easy when you understand human nature and what's going on. As a trader, if you'd like my help getting your discipline under control and actually made easy, well check out the link in the description. The main thing is, is to not just settle for difficulty in your trading at less than desirable profits. I've had traders come to me having struggled with discipline for years, not realizing that they are not stuck with just willpower. Now while seeing the discipline issues can have a really high cost, might make you a little uncomfortable at the same time. Now you see the positive impact on your account when you address this critical matter. No matter where you are with your trading right now, your actions to be more disciplined and have a financial reward. I hope this has been helpful. If it has, share it with your trading buddies and give it a like below. Talk to you soon. Cheers.
