Ask any trader what are the key points to his success in trading and he will name two things – discipline and trading strategy. It may seem obvious. Many new traders think: “Why they are keep talking about discipline and strategy? I know that discipline is important to avoid big loses and strategy will allow me to make profit regularly.”
It is right in theory. The problem is that discipline is a more concrete thing than anything else in trading. You don’t just stay aside and watch the market. You actively participate in market when you trade. Along with the dynamics of the market there is a personal dynamics. Your own reactions to different circumstances in market that affect your decision in trade execution.
One of the biggest fears of a trader is that market is passing by him. Trader feels very bad because he doesn’t take any action and market is just passing by. If that will continue too long he can jump into the market. And it is that exact moment when market starts slowing down and then goes against him.
Trader is becoming nervous. He asks himself “why does it always happen to me?” Then he starts punishing himself in different ways. The main way to punish himself is to lose money. Losing money is the hardest punishment that a trader can make on himself.
Let’s think for a moment why is he accusing himself? Because he didn’t follow his plan and doesn’t have a discipline to do it. Because trader followed opinions of others and he forgot to be himself. Remember that market movement is the movement of psychology in a group. It always attempts to destroy the discipline.
Let’s say you have a strategy but you lack discipline. That means you deviate from your trading strategy under influence of your emotions or other factors. Therefore you are trading absolutely new strategy each time you take a trade. Any of these strategies can be profitable but you won’t know it before you apply it systematically with discipline.
Picking different trading strategies for each trade is surefire way to fail in trading. That’s why I keep repeating to use a trading strategy consistently. It’s not even important what strategy you use, but use it constantly. Most trading strategies work pretty well if you apply them with discipline.
Of course you need to find a system that suits your personality and your trading schedule. It’s really hard to use method that doesn’t suit you. But one you made a choice you need to apply it over and over again.
By: Albert Schmidt