Trading discipline means controlling impulses and controlling emotions. When You are Trading based on emotions, loses are the Only result.
But Why maintaining Trading discipline is often easier said than done.
Usually the first problem arises when the markets are between market trends. Possibly you had a nice profit during a rally, but now the market is trading sideways and has generated several small false signals. There is now no trend, or one is certainly not obvious.
You were strong the first couple of signals, making all the trades, but after a couple of small losses, you are starting to second guess the market and do not trade on your trading strategy.
Just as the vast majority of market participants are driven by fear and greed, many new market timers find it difficult to avoid succumbing to self-doubt and panic.
If those small losses are worrying you, don’t let them. Losses are part of trading with “all” successful strategies. Small losses are acceptable. Large ones are not.
And remember this, sideways markets are almost always either a base, or a top, and are followed by the next profitable trend. If you do not take all the trades, how will be sure to take the one that generates all the profits?
Invariably, the trade you skip, is the big profit maker. The one that starts the next huge trend. And there is “always” a next trend. In fact, 200 years of trading history shows the markets are in a trend 80% of the time. That 20% in between can be rough, but soon the next trend will begin.
Discipline is key. It is vital to take whatever steps are necessary to maintain discipline and take every trade.
Markets Are Unpredictable
The markets are chaotic and unpredictable. The current volatility being a perfect example. When faced with an uncertain set of circumstances, it is easy to see why market timers may, at times, feel unsure and unsettled.
Traders follow strategies that provide entry and exit signals based on back tested strategies designed to be profitable over time. Strategies that are also designed to protect their capital during the inevitable sideways markets.
But no trader can know with certainty how any “one” buy or sell decision will play out.
“The more structure you have to follow, the less uncertain and unorganized you’ll feel. You will know what to do and when to do it.”
The best way to combat feelings of uncertainty is by following a trading plan. If one trades with a detailed trading plan, such as the strategies we trade and teach on he or she will impose structure onto an unstructured reality.
The more structure you have to follow, the less uncertain and unorganized you’ll feel. You will know what to do and when to do it.
Optimistic Yet Realistic
One’s mood and attitude is another factor that impacts the ability to maintain discipline. An optimistic yet realistic attitude is vital to maintain market timing success.
Many Traders struggle with trying to maintain a positive or at least neutral mood.It takes practice.
Emotions And Decision Making
Maintaining discipline is vital for Trading success. It can be extremely difficult at times, especially in sideways (non-trending) markets.
The best way to be disciplined is to stick to your strategy and keep your emotions and impulses under control.
Only by maintaining discipline can you realize long term success in the markets.