How To Develop Trading Discipline

By | November 6, 2021 4:58 pm

Shared by Raj

Successful traders are not only happily self-employed, they are also relentlessly, religiously self-disciplined. One simply cannot succeed in trading without discipline. In order to be consistently profitable, you must have strict rules of operation in regard to your trading, and you must consistently (i.e., all the time) follow them. This fact cannot be stressed too much. Nearly every lapse in trading discipline will cost you money. And the goal here is to make money, not lose it.

Here are seven excellent foundational rules of trading discipline:

Follow your strategy, follow your trading rules—especially risk management and money management rules—and you will be virtually printing money in your account. Forget your strategy and you will be virtually throwing money out the window. The best traders, the most successful traders, have a set trading strategy and strict trading rules, and they abide by them all the time—not just half of the time or sometimes. If you practice good trading discipline on only four out of five trades, that fifth trade is guaranteed to absolutely murder your equity.

1 – Never forget that practicing discipline in your trading is the way you make money.
2 – Be who YOU are, not who someone else is.

You have to find a trading strategy and style that you are comfortable with. Everyone’s different, everyone’s an individual; no matter how well something may work for another trader, if it’s not comfortable for you, it won’t work for you. Simple as that. Don’t trade a strategy you don’t feel perfectly comfortable with; don’t trade lot sizes so big that they make you nervous (this will invariably screw up your trading). Find yourself, your own identity as a trader, and be THAT person. You’ll be happier, and you’ll make more money.

3 – Always live to trade another day.

No matter how badly you trade, the only “fatal” trading mistake you can make is blowing out your account and exhausting your equity completely. Anything short of that, you can recover from and become a profitable trader. But if you’ve got no money left to trade with, you’re sunk. Have a trading rule that will protect you, such as, “If my equity drops by more than 20%, I will completely stop trading for the day.” And follow that rule—see Rule #1 above!

4 – The moment you find yourself praying for a trade to work, get out of it.

I’m all for regular conversation with whatever you higher power may be, but I have learned the hard way that when I move from merely preferring a trade to work to being down on my knees praying for it to work, I already know in my gut that it’s a losing trade that, in fact, “doesn’t have a prayer” of working. It’s a loser. You know it’s a loser. Cut it short and move on to something more promising. And then you can thank God for giving you the good sense to abandon it before it cost you even more money.

5 – Don’t hesitate, don’t over-analyze.

Confident successful traders don’t second-guess themselves to death. When their trading strategies give them signals to take trades, they take them. They pull the trigger—Bang! Once you’ve done your market analysis, in accordance with your chosen trading strategy, don’t go back and start redoing it just at the moment your strategy is telling you to initiate a trade. Here’s a handy tip: You don’t make any money if you don’t put the trade on. Being right about the market does you no good at all if you’re not in the market.

6 – If nothing’s happening with a trade after a reasonable period of time, cut it loose.

Every trade you put on takes some of your mental attention and energy. There’s no point in wasting that energy on a trade in a market that’s just lying dead in the water and going absolutely nowhere for hours on end. If you take a trade and the market simply does nothing, then either your analysis was wrong or at the very least your timing was off. Either cut the trade loose completely—close it out—or at least set your stop so tight that even a very small move against you will kick you out of it with a negligible loss. Your time, energy, and attention are all valuable to you as a trader—don’t waste them. Just move on to another trade that is more worthy of your efforts.

7 – Find your groove—have a daily trading routine.

For consistently successful traders, winning is a habit. And that habit is supported by, and composed of, other smaller habits. Every move you make in your trading day should flow smoothly. The way to get to that point is to make everything you do in your trading day a regular practice, a habit. For instance, I invariably start my trading day off by first looking at the economic reports calendar for the day and at the pivot point levels on the major currency pairs. I do this first thing when I prepare to start trading, before I ever even boot up my trading platform. It’s part of my routine and it helps me settle into my trading groove. By habitually starting my trading day the same way every morning, I reinforce every other habit of trading discipline that will lead to my successful performance as a trader that day.

Bottom line

Trading discipline leads to trading success. Every successful trader consistently follows strict rules in regard to their trading—and that’s what makes them successful traders. If you want to succeed as a trader, you must practice self-discipline every single trading day.

Leave a Reply