In Continuation with previous Article
As W.D. Gann in How to Make Profits in Commodities Wrote
I can give you the best rules in the world and the best methods for determining the position of a commodity, and then
you can lose money on account of the human element, which is your greatest weakness.
- You will fail to follow rules.
- You will act on hope or fear instead of facts.
- You will delay.
- You will become impatient.
- You will act too quickly or you will delay too long in acting, thus beating yourself on account of your human
weakness, then blaming it on the market.
Remember that it is your mistakes that cause losses and not the action of the market or the manipulators. Therefore, strive to follow rules, or keep out of speculation, for you are doomed to failure.
If you will only study the weakness of human nature and see what fools these mortals be, you will find it easy to make profits by understanding the weakness of human nature and going against the public and doing opposite of what other people do. In other words, you buy near the bottom on knowledge and sell near the top on knowledge, while other people who just guess do the opposite. Time spent in the study of price, time and past market movements, will give you a rich reward.
Lack Of Discipline, this silent killer is in all of us!
Over the 16 years in which I have been tradingI have never found a person who has not had discipline issues in their trading career. The brutal honest truth you likely do not want to hear is that you will never succeed at trading if you cannot follow a proven trading strategy and all its rules over and over again.
The meaning of discipline with respect to trading is rather straight. A trader gets a number of buy and sell side entries in a daytime. A trader has or should have a fixed plan in mind before executing every single trade. This plan includes estimating the entry and the exit price along with a stop loss. Giving way to watch these without any solid reason may prove to be fatal in the long term.
While some individuals just don’t have enough discipline to trade, most of us fall victim to fear, greed or our ego causing us to break our trading rules and do silly things with our money or open positions.
Lack of discipline is failing to do what you should do in a given circumstance when trading your strategies. We all know how easy it is to break rules from time to time because our gut feeling is so strong against what our trading strategy is doing but it is a huge mistake to intervene.
How to Avoid Your Lack Of Discipline
There are only three ways that will only help reduce (not eliminate) your lack of discipline.
1. Lose enough money that you now respect the market.
2. You have taken the time to think, create, and test a proven trading strategy that trades within your market philosophy and risk levels.
An interesting way to think of trading is not think but react.
The key to defeating your lack of discipline is to create and trade a system that is very simple to execute. And you must have 100% confidence in the system so you do not step in and alter its trading decisions. The key is to react and execute trade first with your proven strategy, and then once you are done you can think about what and why things did what they did all you want.
Cultivating discipline is vital for consistent and profitable trading. Trading is a matter of getting the law of averages to work in your favour. One implements proven trading strategies, over and over, so that across a series of trades, the strategies work enough to produce an overall profit. It’s like making shot after shot on the basketball court so as to accumulate a winning number of points. The more shots you take, the more likely you will amass points. But the winning player is the person who first develops the skill to make the shot consistently so that at every possible opportunity, the ball is likely to go through the basket.
The last point I want to make, is that if you have your own system it is crucial that you are not tinkering with it all the time. If you keep tinkering with it, then you will never truly know how well it works thus you will second guess its activities and remain an un-disciplined trader.
With discipline comes profitability. Don’t let unjustified wins interfere with your ability to maintain discipline. Follow your trading plan, and reinforce the idea that if you follow your plan, you will end up more profitable in the long run.