Losing discipline is not a trading problem; it is the common result of a number of trading-related problems.
Here are the most common sources of loss of discipline, culled from my work with traders:
- Environmental distractions and boredom cause a lack of focus.
- Fatigue and mental overload create a loss of concentration.
- Overconfidence follows a string of successes.
- Unwillingness to accept losses, leading to alterations of trade plans after the trade has gone into the red.
- Loss of confidence in one’s trading plan/strategy because it has not been adequately tested and battle-tested.
- Personality traits that lead to impulsivity and low frustration tolerance in stressful situations.
- Situational performance pressures, such as trading slumps and increased personal expenses, that change how traders trade (putting P/L ahead of making good trades).
- Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions.
- Not having a clearly defined trading plan/strategy in the first place.
- Trading a time frame, style, or market that does not match your talents, skills, risk tolerance, and personality.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.