Here’s a question I received over the weekend that I know is one a great many traders have. It’s about trading discipline.
John
Hi. My question is as follows:I have a couple of systems that have made good money on a stand alone basis over the past 6months or so. Long may it continue
Yet, I continually throw away money taking some very subjective decisions, trading with bias and squandering the hard earned gains
I am going through reading some very powerful psychology books at the moment by eg. Mark Douglas. They are helping. Please can you provide some additional pointers please to ensure that discipline is upheld at all times
Regards
Vimal
One of the more annoying aspects to many so-called trading psychology books, articles, discussions, and what have you is the “be disciplined” advice provided. That’s kind of like telling someone to be happy. It’s pretty useless. It demands that the question “What is causing me to lose discipline?” be asked and answered, since no one willfully decides not to be disciplined.
To that end, I recommend reading Brett Steenbarger’s first book, The Psychology of Trading. Brett’s second book, Enhancing Trader Performance, and his latest release, The Daily Trading Coach, are both excellent resources as well, but more in terms of overall trader development. The first book caught my attention for discussing quite specifically the ways and reasons traders lose the discipline in their trading, causing all the problems and frustrations Vimal outlines above. Through a series of examples, Brett demonstrates from his own therapy experience the things which can create psychological pitfalls in trading, and of course in life.
Good trading requires a degree of self-awareness – understanding what you’re doing and why. The is a reason why Vimal is going off the script and not following his trading plan. I’m not qualified or knowledgeable enough about his situation to be able to say what that might be. My basic view is that either he doesn’t trust his system explicitly or that in some fashion the way the system operates doesn’t quite mesh with his personality.
If you’re in a situation like Vimal, definitely give Brett’s first book a read. At the same time, step back and take a look at what you’re doing (or not doing) to see if there are patterns you can identify. Keeping a trading journal will help in that regard a lot.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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