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Taken from a published Q&A
I believe that we only do things because we believe there is a
benefit to us in doing it. So if you find that you violate your
own rules then on some level you are doing so because you think
it is for your own good. Therefore you have some erroneous
belief about what is good for you in trading.
Firstly you need some
clearly defined rules, both for trades that are losers and
trades that are winners. It could simply be that you get out of
your position when the market has moved 1 point against you.
When you have clearly defined rules, go and trade with them and
observe yourself. Your objective once you start trading is to
obey your rules (focus on execution). You have a good day if you
obey your rules and a bad day if you violate them. The issue of
making money is secondary. If you obey your rules and you are
losing consistently you need to re-evaluate your trading
strategy and start again. Forex trading involves a substantial
risk of loss, and no system can completely eliminate that risk.
However, if you consistently obey your rules you may have a
chance to be successful. You may have to rework your trading
strategy a few times before it happens. It is your ability to
obey your rules that can underpin your success.
If you find that you
don't obey your rules, you need to consider what you are saying
to yourself when you violate them. If you don't get out of a
losing position when you are down a point you must be saying
something to yourself. Whatever it is you are saying, if you ask
yourself the question "What would it mean if....?" you will
start to get to the route of your erroneous belief.i.e. if you
say "I can't get out now, this will be my 3rd loss in a row",
write down that thought, then ask "What would it mean if I had 3
losses in a row?", then write down the response and ask the
question of that response, until you get to the core belief.
When you find the underlying core belief that dictates your
unwanted behaviour (not cutting losses) you can then question
the validity of that belief and chose to change it.
I think the critical
thing is that we act according to our beliefs, whether that
belief is conscious or not, and we can only change our unwanted
behaviour by making the underlying belief conscious and
questioning it. That is what I found when I stopped smoking and
drinking.
I hope this makes some sense,
Malcolm Robinson
Good luck
http://www.themasteryoftrading.com/ftc/cb.php
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