Trading Discipline
Fundamental or technical analysis, short or long time frame, mechanical or discretionary. There are countless different ways to trade, all with the potential of success, provided you can develop one skill – DISCIPLINE. A trader’s ability to become and remain successful is pretty much dependent on it…
I’m not sure that there are any short cuts to gaining this magical ability, it’s a habit that you need to practice over and over in your trades until it becomes an ingrained part of your trading psyche.
What is discipline in trading? Well of course the obvious one is cutting losses early. Protecting your capital is the key to staying in the game. When you enter a trade, and it doesn’t perform as you had anticipated, once it hits your stop, cut it…you were wrong, accept it and get out. Losses are part of our expenses of running a business. Keep them down!
Discipline should also extend to position sizing, trade frequency, the reason for entering a trade, and even pre market preparation (scanning charts, setting alerts, etc).
Once you’ve decided how you are going to trade, try to stick to it. Trade the style that you have decided suits your personality and situation, don’t start trying to instantly emulate others just because they seem to be doing better than you. Evolve your trading style and try new things, but do it in a discipline and structured manner.
As you start on this journey, start small and grow. Maybe set targets to earn yourself the right to trade larger positions once you’ve shown consistent success and discipline. Don’t let greed or jealousy cloud your judgment.
In the past I’ve found that I could be very disciplined for a long period of time, and then all of a sudden it deserts me, for what at the time seemed to be for no logical reason. But many things can and do cause a loss of discipline:
* Environmental distraction – crying kids, renovations, computer problems
* Fatigue / mental overload / boredom
* Overconfidence / loss of confidence
* Personality traits / trading beyond your ability / trading a style that doesn’t suit your personality.
If you wake up and find that your discipline has taken a short break, first try and determine the cause. If you can establish and accept the cause, you should find it much easier to eradicate it.
But in the meantime here are a few things you could try until your discipline returns:
* Trade smaller positions with tight stops
* Trade less frequently
* Only enter trades that meet the legitimate conditions of your trading style.
* Keep a trading log. Make notes on every trade, especially those that were unsuccessful. See if you can identify a pattern in your larger losses.
* Lock in some small wins to give your self confidence a boost.
Hopefully you’ll soon be back on the long, straight, disciplined road again in no time. The road to success.
Trading discipline: It really isn’t that hard
This article was originally intended to stop here but I felt I needed to add a few paragraphs this week. This is basically because over the last couple of weeks I’ve let my trading discipline slip, and now when I look back at it there isn’t actually any real reason why it should have.
Obviously I did the usual thing of deluding myself and making up excuses. ‘I just don’t have the time, I’ve got far too much on’, ‘I’ve had a mental week at work so it’s ok that things have slipped a bit’ and yet I still managed to find the time to laze about for a couple of hours throughout the week and catch up on a few episodes of Game of Thrones. The point being I still could have fitted in enough time to focus on both trading, and sticking up a couple of posts on here, but ‘Why didn’t I’?
Well that my friends is all down to that little thing called discipline. It’s a mindset thing. I pride myself on having a pretty decent routine when it comes to trading, but once that slipped for a couple of days the routine was broken, and then it became routine to let things slip and therefore harder to get back on track. It’s all a vicious cycle.
Branson, Gates, Jobs.
Quite the dream team I know, but these guys had a work ethic when starting up. I’ve had the pleasure of reading the biographies of all three, and the one thing that stands out the most is their unique approach to discipline. It’s almost as if it is not a conscious thought. If something needs to be done, then they just do it. Nail a coffee and just do it. Wake up an hour early and just do it. It all sounds so simple, and it really must be, it is just all about adopting that mindset. Make the most of the time you have available. That doesn’t mean you have to make massive sacrifices and never go out or do anything. If you fancy a few mid week beers then go for it, just do a little extra prep the night before to make up for it.
In short, what I’m trying to say/ rant, is that having the correct mind-set and discipline for this really isn’t that difficult, and you don’t even have to make massive sacrifices which is what usually comes to mind when someone harps on about ‘discipline’. There’s 24 hours in the day so plenty of time to get everything sorted and still have a life.
Just do it!
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