It is beyond debate that the disciplined trader is the long term successful trader, but how to maintain discipline, through the early fledgling part of your trading career, is one of the key challenges we all face as traders. And unless we get this aspect of our trading right (from the very start) then it’s unlikely we’ll ever enjoy trading success. How we work on our discipline is a relatively simple process, but similar to creating a trading plan, it’s often overlooked as one of essential ingredients required.
Trading plan
The trading plan offers an unbeatable anchor for your discipline; it provides focus, precision and certainty. If you set out your basic trading plan blueprint and then continue to refine it until it represents a bulletproof document that you have faith in, then it’s a lot easier to maintain your discipline. Within your plan, if you’re trading manually, should be: a limit on your losses, the times you trade, the risk per trade you take, the risk per day you take etc. It’s essential that you make a commitment to never breach this plan during trading times, you only ever adjust it on an EOD (end of day) basis, when you’re free to make adjustments.
Automation
By association, automating or semi-automating your trading plan, should cause discipline to then also become automatic. Emotions can interfere with your trading in many ways, in removing any temptation to manually interfere in your trading, you’re indirectly obtaining the immediate benefit of automation. Your discipline is then concentrated on simply observing and occasionally overriding your automation.
Letting trades come to you
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We need to develop the discipline of not chasing the market and instead think about letting the market come to us. We can do this by setting market entry orders, or perhaps by creating alerts and alarms, to be triggered on our smartphones.
Never panic, never manually intervene
As we’re often fond of repeating; once you’ve committed to take a trade then you’re already invested, you need to consider the risk you’ve taken as the price you’re paying to do business in our business. Never alter your stop by widening it, because you become convinced that a trade that’s looking bad will eventually turn in your favor. If you do then you’re automatically interfering in the often random distribution between winners and losers, and you’ll be abusing and corrupting any trading edge that you may have developed.
Walk away
There are times when you simply need to walk away from your computer and trading platform and take a short break. Trading can (very quickly) become a business that you begin to dislike if you’re experiencing an overload of stress, or incurring large and avoidable losses. And enthusiasm is essential to maintain our healthy involvement in the industry. If you find that you’re intervening in trades, corrupting your trading plan, panicking and overall losing your discipline then take a break. If you find yourself (as a manual trader), constantly chained to your desk and your personal trading computer, then you’re trading in a way that is common to novice traders who initially discover trading as a potential career and you’re making a classic mistake that needs correcting ASAP.
You will not engineer trading success and profitability by spending hours staring at charts, the time you spend immersed in the market needs to be far better utilized. Spend it applying fundamental research into what moves the Forex markets or spend it experimenting on a demo account with various alternative trading strategies, but overall spend it wisely.
Article by Taylor Wilman