Why Traders Struggle With Discipline

By | April 3, 2014

If there’s a single theme that dominates discussions of trading psychology, it’s discipline.

Traders are routinely encouraged to control their emotions, stick to their processes, keep journals, whatever.  If you lapse in your trading, it’s because you’re not sufficiently disciplined.  Call it the puritanical approach to trading: if you don’t stick to the straight and narrow, yours is a failure of willpower and commitment.

Research provides us with a different picture, however.

Willpower is a limited resource, tied to glucose levels in the brain.  When we exercise willpower in one set of circumstances, we can become depleted for the next ones.  Spending hours in front of a screen is an activity tailor-made to deplete willpower.  Overtrading and breaking one’s trading rules, from that perspective, is less about self-sabotaging and more about the limits of our capacities for self-regulation.

The good news is that willpower really is like a muscle, in that it can be built over time.  Until your willpower muscles are of bodybuilding quality, however, an important trading practice is simply getting away from screens and renewing one’s energy and focus.  Quick exercise, a drink of lemonade, a power nap–all are ways of restoring discipline.

Ironically, it’s often the most driven performers who drive their willpower into the ground, leaving themselves frustrated with themselves and their performance.  It helps to think of trading more as a distance race and less as a sprint: pacing oneself is key to finishing the race.

And how far can one train one’s willpower?  Watch the Penn and Teller movie “Tim’s Vermeer“.  It may well be the case that the reason passion for one’s work is essential to success is that only such passion provides the gym time needed to build world class willpower muscles.

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