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You raised a good question. More broadly, the question is why traders do not follow rules (here rules only refer to rules of trading discipline)?
I had the same problem with greed (and more often with fear) before. The way I remedy it follows the following logic:
1. We all know we need to have discipline in trading, and we have read/heard most of the rules
2. However, we all subconciously resist the rules, although conciously we all agree we "should" follow the rules
3. Why we resist the rules? I think it is because the rules are not "ours"--not created by us, not from us. They are asserted by someone else, not from within. In other words, we are not totally convinced that "why should we follow the rules"?
4. To get ourselves to follow the rules, we must convince ourselves that following rules is "in fact" better than ignoring rules, or worse, subconciously challenging the rules.
Then the question is how do we convince ourselves? Not different from other things in trading. If you read an interesting trading concept, do you apply it immediately? No, you want to "test" it. The testing process is a way to convince yourself that the concept is useful. And now, because it is you who have done the test, you are much more willing to accept the result than otherwise, when the concept was merely told by someone else.
Unfortunately for most of us, the "testing" of rules is missing. I believe it is much harder to test these rules than testing a trading concept. For example, how do you test this rule: "Get out if you are wrong, do not hope and pray"?
However, it is not totally un-testable. One way is to create a column in your trading journal, for instance, with the header "trading with hope". This column records the difference in trading results made by "trading with hope". For example, if you had followed your rules strictly, you would have made 500 dollars of profit while by trading with hope, you lingered a little longer, and you made 700 dollars. Then record the difference, 200 dollars, in that column.
Yes, in this example, you actually were better off by trading with hope. That means, sometimes you are rewarded by violating the rules, and because we human beings have a selective memory, we tend to remember those instances when we are rewarded and tend to forget those "unpleasant" instances when we are punished. Our memory is not reliable but, unfortunately, most of us ARE relying on it. However, by writing down the difference every time, you will be able to "see" more clearly than what your memory tells you.
At the end, say if you have made 50 trades, and the sum of the "Trading with hope" column is 4,000 dollars (that happens though), you might want to tweak your trading plan. The important thing here is that now you have an objective assesement of your behavior, and you can talk in numbers, which is more powerful than some abstract nouns.
The same is true for the opposite, which I believe might appear more often. If you found that "trading with hope" created a total loss to your bottom line, you are now much more "convinced" that "not trading with hope" is better for you. At this moment, it should be much easier for you to not trade with hope, because now, the rule is somehow "within" you--you have made that conclusion from your own trading, not someone else's.
This is how I have "taught" myself to follow the rules. It may not apply to every trader, but I hope it is helpful to many.
edgefirst is exactly right. But I've also learned that no matter how many times someone tells you these things, it won't sink in until you experience it and figure it out for yourself.
I wrote a blog entry many months ago about how parents try to tell their kids not to run up credit card bills and to be responsible with money. Most kids surely do not listen, but a few years later they are in financial trouble and wish they had. They had to experience it themselves before they learned the lesson.
Trading is the same. Only much more difficult. Trading tests every aspect of oneself, and it puts you and your family through hell. (speaking from experience). But it is also one of the most rewarding things you could ever do for yourself and your family (also speaking from experience).
The hardest thing to do and the right thing to do are usually the same.
Even in automated trading you must deal with greed. Many would-be automated traders fail because they are too greedy, taking risky entries, trying to catch every turn, etc.
Personally in discretionary trading I have more trouble with fear, jumping out way too quickly. Thats why I prefer automated trading, the computer definitely has no fear (although sometimes that can be a bad thing)
I appreciate greed is a risk and personally I deal with this by striving to reach to my target which I aim always to be 3 times my risk. Sometimes I fail at it but it doesn't matter. Even on days where I trade only once and I make 2-3 ticks I try and be thankful for that.
