How To Develop Trading Discipline

There’s a reason I opt for simple trading systems; the more inputs a system has, the harder trading discipline becomes.

So I’ve made all the systems, as idiot-proof as possible – me being the idiot.

But designing systems is one thing, implementing them is a whole different ball game.

Don’t be fooled into thinking because a system is simple, the job’s done.

It’s not.

 

What beginners never understand

Writing a blog for newbies brings a dilemma. Beginners are all about finding the right ‘system’ and very rarely about developing the deep change needed to be a successful trader.

Sure they pay lip service to money management and psychology; but when all said and done, it’s ‘just give me the damn system so I can make the fast bucks’.

Rarely, if ever, do they appreciate the discipline trading calls for.

I really would love to be proven wrong of course.

Nothing would please me more than comments on how my readers are killing it with the systems I’ve talk about.

But the appreciation of discipline is one that comes with experience – lets just hope for you, it happens sooner rather than later.

 

The cycle of doom

Sticking to a system (especially a simple one) sounds easy; until you’ve tried it with real money on the line.

Then everything goes tits up.

You take a loss, so you tweak the system. Maybe, you use a different stop-loss method.

More bad results come, so you tweak some more. This time you scrap the time limit of order.

You then have a few winners, and congratulate yourself on the changes.

Then, a few losses, just as you bump up position size.

Then, you get scared.

You decide you’ll sit the next one out.

That’s ok, you tell yourself. The Fed meeting, or CPI number, mean the trade will lose anyway.

But as is so true with trading, your thinking is wrong; the trade’s a goer and blasts off with you on the side lines.

You start cursing, it’s the best move in months; and now, heavily stretched above the SMA you pile in because of FOMO. Just as the market reverses.

‘This stupid strategy clearly isn’t working.’

So you tweak the hell out of what’s left, until what remains is a Franken monster.

If this doesn’t all sound familiar, I’m certain it will at some point.

It’s a necessary process all traders go through.

The question is, do you have the self-awareness to recognise it as it happens?

I didn’t, that took me years.

 

Honestly, how disciplined are you?

You can’t just pluck trading discipline out of thin air, like some magical hack that’ll solve all your problems.

The fact of the matter is, how you do one thing in life is how you do everything.

So, you need to ask yourself – just how disciplined are you?

If other areas of life lack discipline, sorry but you ain’t gonna find it in trading either.

In the torrid eight years I had as a losing trader, the other areas of my life were also well out of whack.

There I was, beating myself up for not sticking to my trading rules; when I couldn’t even keep my house tidy, or implement even the simplest fitness regime.

It’s laughable now – but at the time I couldn’t make the connection.

I don’t want to go full Anthony Robbins on you, but you do need to shape up your ass, if you’re going to make a go of trading.

 

Why?

If your life’s a bunch of crap, each loss is going to erode the what self-worth you have.

If your life’s boring, you’ll be looking for escape and will happily go looking for it in the market.

You’re piss poor? Your gonna take bigger trading positions than you should.

Or if you really hate your day job, you’ll overtrade your account to become a full-time ‘trader’.

Hung over, stoned, or lacking in sleep? Then, every adverse price move will magnify your anguish.

Trading discipline

 

Becoming a disciplined trader

Amateurs look for short cuts. Pros take the steps to improve.

And I’m hoping everyone reading this blog has a desire to turn pro.

To be pro though you must act pro.

And the only way to do that is to work at it, constantly.

By that I don’t mean scalping each moment of the day. I’m talking about areas outside the mechanics of trading.

Pro sports players only play a game or two a week, max. The rest of the time, its training.

They train so they won’t choke on the day.

You’ll learn a lot from deliberate practice in the sports world, and in other elite disciplines.

I’ve broken down improvements in trading into four areas: personal development, trading and market related, performance monitoring, and organisation.

Steady improvements in each, will over time turn you into the disciplined person who is capable of maintaining trading discipline too.

 

Personal self-development

• getting fit
• diet
• confidence building/outlook on life
• career skills building

I’m likely to get a few groans here. What the hell does it have to do with trading?

Quite a lot actually.

Let’s take getting healthy. You brain works better, it becomes more silent. You don’t question yourself or panic on a price reaction.

Confidence building? You aren’t going to fall to pieces after some small loss. Your inner strength comes from, well inside – no outside circumstance is going to affect how you feel.

Career building skills? WTF? You have other things going on in your life, so you won’t get butt hurt after a string of losers.

 

Trading and market related

• best timeframes
• stop management
• markets chosen
• trading tools used

It’s a cliché but true, if your strategy doesn’t suit your personality you won’t stick to it.

I’ll add to that, if your strategy is beyond your skill level you’ll stress yourself out.

I know most beginners want to be scalpers for some odd reason, but really…its not the best place to begin.

I also think some markets are harder than others, forex is harder than index trading – so why not take the easier route?

There are also valid arguments for using some methodologies over others.

I do think price action, or simple pattern trading are better place for newbies to start.

 

Performance monitoring

• keeping trading records
• self-journaling
• pre and after trade checklists
• weekly trading review

As a losing trader I rarely kept records. The pain of seeing my pathetic self was too much.

The irony is, if I’d kept meticulous records, I would have seen my mistakes that much sooner.

There is another reason to keep journals, records and perform an after-trade audit – it has the potential to put distance between us and an impulsive market order.

Anything that makes us step back from our in the moment decisions is a very good thing indeed.

 

Organisation

• having a tidy trading environment
• a set routine
• creating trading documentation and best trading practices

Best practices are essential to any good business. If you haven’t got a fully documented trading strategy down on paper – if its just in your head – then you haven’t really got a strategy at all.

Its far too easy to go off on a tangent and trade on a whim.

Become obsessive over your documentation, complete with screen shots, step by step process and a complete trading manifesto.

 

You have to give value in business, even in trading

Wow that’s a lot of hard work I hear you say. Your damn right it is.

What did you expect, an easy ride?

In every other business on the planet, you have to give value in exchange for money.

The cheats and frauds are always found out in the end.

You think trading is any different?

We might not have customers or clients. So the only way you can give value is to yourself.

Your subconscious isn’t going to let you off the hook that easy. If it thinks your earning money you don’t deserve, it will soon put an end to that.

Period.

Only when you improve the quality of who you are with the trading results follow.

So yes, while the systems I use are simple, basic, and very effective, the price you have to pay to use them is becoming a better version of who you are.

 

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John Scott
John Scott has been trading CFDs and FX since 2003. His favourite markets are the Dow 30, Gold and the GBP/USD. John believes short-term price action trading is the best approach for beginners to trade. Tradeneophytes is his humble attempt at helping new traders reduce the learning curve to trading success.
Posted in Home Page Grid, Trading Psychology.

John Scott has been trading CFDs and FX since 2003. His favourite markets are the Dow 30, Gold and the GBP/USD. John believes short-term price action trading is the best approach for beginners to trade. Tradeneophytes is his humble attempt at helping new traders reduce the learning curve to trading success.

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Semn
Semn
3 months ago

Hello,
 
Thank you for this article. I find it very useful and I find myself here. I am a beginner on my trading journey. I’ve found you on babypips.com and trying to implement what you share here.
 
I like your content and your tips, they are unique and I feel that they are useful or they will be useful to me. I’ll be staying on your blog for a while.
 
Best regards,
 
Semn

Jamie Lawson
Jamie Lawson
2 months ago

Laughing aloud at this article, only last week after having 3 consecutive losses in a row that i had entered prematurely, (not waiting for the candle to close before entry) i asked myself why do i keep breaking the rules of my strategy? then it slapped me in the face i have always been a rule bender or slight breaker within society and gotten away with it but it also dawned upon me that breaking the rules within the financial markets is different to society. The Market will always teach us the hard lessons if we are impatient. I did… Read more »

G Ryan
G Ryan
2 months ago

Searching for Larry Williams OOPs I found your blog. It is amazing that you can still convey the gut wrenching feeling so vividly after so many years. Four month into trading I still haven’t found a system that works for me, a rational financially conservative indecisive person who doesn’t want to miss out. Is Tesla the new bitcoin?