The Ideal Trading State

Forex Strategy The Ideal Trading State

The Big ‘D’ – Discipline

Anyone who has traded or has read about trading will be familiar with the word discipline. In New Market Wizards, Jack Schwager found that, “[d]iscipline was probably the most frequent word used by the exceptional traders that I interviewed. Often it was mentioned in an almost apologetic tone: ‘I know you’ve heard this a million times before, but believe me, it’s really important’.”

But what is it? What is trading discipline? How would you define it?

Most people, when I ask them that question, suggest that it is the ability to be able to consistently execute your trading strategy and to follow your trading rules, and this may also be inclusive of completing trading disciplines such as preparation and evaluation.

Let us consider the two keys to successful trading from earlier:

1. Having a strategy with an edge and a positive expectancy.

2. Being able to consistently execute the strategy.

It is the second of these that we are concerned with, although we must remember that being disciplined enough to put in the work to develop a trading strategy with an edge is obviously required.

Richard Dennis who created the Turtle Trading project once made the following observation:
“I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught people. What we couldn’t do is give them the confidence to stick to those rules even when things are going bad.“
(Quoted in New Market Wizards, by Jack Schwager)

In trading you will ultimately have to overcome what is likely to be your own biggest challenge: yourself. Embrace it, it is a part of the journey!

Often when I meet traders they will, at some point, tell me of their discipline challenges. Some of these traders see themselves as being ill-disciplined, and talk at length of their poor discipline. This will in all likelihood merely compound matters, reinforcing their problems with negative self-imaging. It is important to understand that discipline is a general term, an umbrella for a variety of different trading behaviours, and that very few traders have challenges with every one of these behaviours. Indeed in most cases it is one or two areas that are the major obstacles to moving their trading on to the next level.

It is useful for us as traders to be aware of the components of discipline and to be able to specifically define our challenges so that we can seek the required methodology to address them. When a car breaks down it is very rare, if ever, that the whole car fails – it is usually one or two component parts. But some component parts are obviously more important and have a greater impact on overall operation than others when broken; this is the same for us as traders. Isolating your specific challenges will help you target and defeat them, as well as keeping your discipline difficulties in perspective.

So when do traders lose discipline?