Discipline in trading is sticking to your own trading plan.
A trader who exercises self-discipline is able to trade a system with the appropriate position sizing, stop-loss levels, and trailing stops over time, just as they had originally intended.
A trader may have feelings of dissociation at times.
If they spend the time the market is closed researching trading, building a system, and outlining the method they will use to enter and exit trades and how large they will size their positions, they may feel calm and sensible about the process.
Then, when the market is active and prices are changing and they are winning or losing money, their emotions and ego might flare up and make it more difficult to think rationally and execute their set strategy.
The mark of a really professional trader is the capacity to act morally even when doing so goes against your gut.
Here are five situations in which a trader may be tempted to let their emotions, wants, or ego get the best of them instead of sticking to their trading plan, and the best way to avoid giving in to those urges.
The consequences of failing to act on a trading signal as soon as it appears can be severe.
The fear of rejection might prevent you from entering the contest.
You could not have conviction in your signals because you haven’t backtested them enough, you don’t grasp the edge, or you’re trading too aggressively.
If you want to trade, you must embrace the possibility of losing money.
If you’re nervous about entering a trade because of anxiety you may want to reduce the amount of your stake.
“In my opinion, failing to make a crucial deal is far more detrimental to your financial well-being than making a poor trade,” he said.
“- William Eckhardt
A trader’s lack of self-discipline might lead them to enter a transaction too late, when the odds of success are lower.
Having the knowledge that any one transaction won’t have much of an impact on the following hundred deals will help you resist the need to chase.
There will be more opportunities to trade in the future.
In trading, a lack of patience can be shown by jumping into a position too soon.
Trying to beat the market by purchasing ahead of a signal is risky since you are making irrational purchases.
A trading signal is a filter that helps you make profitable trades more reliably.
One cannot have any advantage over other traders if they lack the self-control to wait for their signal.
Because they lack both a structure and guidelines, they are unable to manage their trading activities properly.
Do you believe a firm could succeed if it had no guidelines or procedures to follow?
Since they don’t have any guidelines to follow, every action these traders take is a bad one.
— Van Tharp
Discipline to follow one’s own trading method might be undermined by one’s own opinions about what the market “should” be doing or one’s own prejudice about what the market “will” do in the future.
A trader needs the mental fortitude to accept the possibility of anything happening, as well as the self-control to stick to his or her trading method, so that he or she may profit from the market’s inevitable swings.
Maintaining the self-control to stick to your trading plan is a major plus.
You need to be a disciplined trader and let your advantage play out over time if your trading system has a quantifiable profit factor over a period of deals, or if your rules provide acceptable risk/reward ratios as a discretionary trader.
Your unique qualities are your greatest asset.
Discipline is a valuable asset in trading.
You’ll improve as a trader and make more profitable deals if you can reliably put your trading plan into action in real time.
No trading system will be profitable no matter how good it is if it can’t be implemented with discipline over the long term.
Implementation skill is what discipline is all about.
Having confidence in yourself and your trading system is the foundation for discipline, which is essential if you want to utilise your trading strategy as a true guide to success and not just a nice idea.
Similar to other high-performance professions, only the top 10% of traders really turn a profit, and the top 1% become extremely rich due to extreme outlier success.
Those who want to succeed at the highest levels must adopt the strategies used by those already there.