If you wanted to become full time consistently profitable trader, you’ve got to learn how to become a disciplined trader.
There’s just no way around it.
We know, a system generates trades that have a split probability of a win or a loss—implying that every system or strategy has a 50% chance of making money and a 50% chance of losing money.
If every system has an equal likelihood of making or losing money, then what’s that one thing that tips the odds in your favour? Discipline.
My aim in this blog is to remind you and hopefully show you a thing or two that will help you to become a disciplined trader.
What is trading discipline?
The dictionary definition of “discipline” – the verb – is to train oneself to do something in a controlled and habitual way.
In other words, trading discipline is, training oneself to do what needs to be done, when it needs to be done, and how it needs to be done, not just once but all the time.
Why do most traders lack discipline?
If discipline is the backbone of a successful trader, why then are most traders undisciplined?
I believe it is because, as traders, we have not understood and accepted the truth about how the market actually works.
For every trade you make, there is an equal chance of making a profit or a loss. It’s 50:50.
For every losing trade, there is a chance that the losing trade can turn to a positive. That applies to a winning trade too.
So, to most newbie traders who fear loss, they have bias on that one side of trading, that losing trade, has a fair chance to return, might make us money or will provide break-even exit.
And so, what does an undisciplined trader do?
They start “hope” trading. He breaks the very rules he created to help him trade better. He over rides the stop-loss he put to save him from downside. He hopes this one time the market will favour him.
I have also blown trading account after another, all the while knowing this truth.
How do you become a disciplined trader?
You become a disciplined trader by religiously following the rules of your strategy.
That sounds so simple, doesn’t it?
If you don’t have a clearly defined strategy, then you can never be a disciplined trader.
You can’t claim to be a disciplined trader or dream of making money from the markets by jumping in and out of trades based on tips and advises of others. Eventually, that ends one way. If you have a strategy but struggle to stick to the rules of the system, then you don’t trust your system enough to follow its rules.
So to become a disciplined trader, you need to:
Create a trading strategy or system and a set of rules on how to trade it.
A trading system can only be trusted after it proves itself over an extended period of time.This requires a. proper back-testing of your strategy.
You then define the conditions or rules of what to do when you see specific price structure – your trading plan and trading rules.
Once you are confident your strategy gives you an edge, you will have no trouble following your rules because you know from back test data that over time you will make money.
Make rules & Follow that rules. A trading system or strategy accounts for 50% of your trading success. The remaining 50% is the discipline to follow the rules of the system.
A disciplined trader works within the confines of their trading strategy, religiously following their plan. If you can achieve this obedience to your plan, you can stop going through the motions of the undisciplined trader.
Holding on to losing positions, hoping they will turn into winners.
Over-trading for fear of missing out (FOMO), for fun, or revenge trading.
Over leveraging your account.
To become consistent and disciplined trader, you should:
Have a strategy and game plan for entering and exiting trades.
Have and use proper money management while trading
Consistently and religiously follow your trading plan.
Take time to review your trades, learning from your wins and losses.
Not over trade.
As a trader, you must be fully confident in your strategy, so much that you trust it to enter a trade when it says so.Like I said earlier, getting to this place of complete trust, is hard, most traders never get there because of the nature of markets. A losing trade can easily become a winning trade, so one may not see the point of cutting their losses.
To become disciplined, you need to make yourself to understand that, though that losing trade may return to give you a handsome profit today, tomorrow that one trade will wipe out your account.
And all you need to get to zero account balance is just that one bad trade. “A one broken rule.”
We all struggle with discipline in initial day of trading. But you have to know that the markets work by taking the money of impulsive and undisciplined trader to the disciplined traders. Discipline produces a bumper profit to a trader who commits to it.
See you all in next blog.