AspirationTrading Psychology

Trading presents a paradox for traders. Its rules are, or rather should be, extremely simple, but for various reasons, traders cannot adhere to them. This issue is, of course, compounded by the fact that there is a large population of traders who don’t have any rules.

This completely undermines a key component of trading success: consistency.

You turn up every day and apply your rules in the same way each time you trade.

This causes problems for traders, as there is no novelty in this, and it becomes boring very quickly, which clashes with their assumption that trading should be exciting. Hence, they change their trading system as regularly as they change their underwear. And even after changing their system, they still fail to comply with the new rules. So the cycle of changing the system and failing to apply its rules continues.

This raises the question of why consistency is so hard for people – we struggle to follow any set of instructions, whether in the short or long term. To put this into further context, trading is the simplest profession I know of; it only has three rules.

1.  If it is trending up, you buy it.

2.  If it is trending down, you sell it.

3.  Don’t bet the farm.

You can add a fourth, which is rinse and repeat until you pop your clogs.

This leads us to a discussion of why rule following is so hard for traders, and I think it breaks down into five major components.

1. Emotional Interference

Trading is inherently emotional. Fear and greed are two dominant emotions that can override rational decision-making.

• Fear can cause premature exits when a trade moves slightly against the trader, even when the system advises holding.

• Greed often leads to overtrading or ignoring stop-loss levels to achieve greater gains.

• Impatience can push traders to enter suboptimal trades outside of defined setups, simply due to boredom or FOMO.

Emotional control is critical in maintaining rule-based execution, but is often underdeveloped.

2. Overconfidence and Cognitive Biases

Success in a few trades can breed overconfidence, leading traders to believe they can “outsmart” the market.

• Overconfidence bias causes deviation from the plan, with traders trusting their gut instinct over data.

• Recency bias makes recent wins or losses overly influential, skewing judgment.

• Confirmation bias leads traders to selectively interpret market data in a way that justifies breaking rules.

These cognitive distortions undermine rule-based systems, especially during times of volatility.

3. Lack of Discipline and Process Orientation

Trading discipline is about executing a plan without deviation. Many traders lack this due to:

• Inadequate routine development – Failure to create pre-trade checklists or structured processes increases impulsivity.

• No performance tracking – Without journaling or reviewing trades, patterns of rule-breaking go unnoticed and uncorrected.

• Short-term mindset – Focusing on daily P&L rather than long-term edge leads to the pursuit of quick wins.

Systematic trading requires consistency over a statistically significant sample size, not sporadic improvisation.

4. Poorly Defined or Inflexible Rules

Sometimes, the issue lies in the rules themselves. If they are vague, overly rigid, or not tailored to current market conditions, traders may abandon them.

• Lack of clarity – Ambiguous entry/exit criteria leave room for subjective interpretation.

• Overfitting – Rules based on historical data may not perform well in live, evolving markets.

• No adaptability – Rules that don’t account for volatility shifts, macro news, or liquidity events can feel irrelevant, prompting traders to override them.

For rules to be followed, they must be both clearly articulated and flexible enough to adjust to different regimes.

5. External Pressure and Unrealistic Expectations

Many traders operate under external pressures that encourage them to deviate from a disciplined approach.

• Performance pressure from clients, peers, or social trading platforms can push traders to force trades.

• Unrealistic profit expectations lead to overleveraging, violating position-sizing rules and increasing the risk of ruin.

• Comparison trap – Seeing others’ performance on social media can trigger impulsive behaviour to “catch up.”

This external noise distracts the trader from their internal process and leads to a breakdown in rule adherence.

The End Point

Adhering to trading rules is less about technical skill and more about psychological resilience, discipline, and a process-driven approach. Traders who recognise and address this dynamic tension are more likely to survive. And the longer you survive in markets, the more profitable you are.