Improve Your Trading Portfolio by Improving Your Discipline

Improve Your Trading Portfolio by Improving Your Discipline
“Talent without discipline is like an octopus on roller skates. There’s plenty of movement, but you never know if it’s going to be forward, backwards, or sideways.” –H. Jackson Brown, Jr.
octopus roller skates

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So, you think you’re ready to start trading for real? You’ve earned a fortune on your demo account with paper trading and now you’re ready for the big show. But, beware of the numerous pitfalls that dot the landscape of your new trading future.

When you make the move from the paper world to the real world, the transition won’t be as smooth as you might anticipate—that is, unless you have a disciplined plan of action, vigilant study habits, and a clear mind that keeps you from getting greedier than is good for you.  

Trading is not for the feint-hearted, nor is it for those who think it’s nothing more than an easy, lazy way to make a quick buck. Master your emotions, ditch the fear, embrace reason and shed any lingering laziness, before you start down this path.

Discipline is where it’s at, so take to heart our Top 5 tips for getting a solid start on your new trading career:

1.      Set Specific, Realistic Goals

“Take up one idea. Make that one idea your life – think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea and just leave every other idea alone. This is the way to success.” –Swami Vivekananda

Without clear goals, there won’t be any way to really measure your success. A big, one-time win on stocks may look good, right off the starting blocks, but it’s not necessarily a barometer for your overall trading success—and it might lead you astray. The same is true for a big loss, right at the start.

Goals needs to be specific and they need to be achievable—not just once, but consistently. When you think of goals, think long-term, which requires a certain level of patience that only comes with strong discipline. Once you have a long-term goal, you need a timeframe for its achievement.

 

Improve Your Trading Portfolio by Improving Your DisciplineYour immediate goal—or your first milestone—should not be a Ferrari. A Ferrari is the icing on your trading cake, once you’ve mastered your plan. This is where the really successful traders rise to the top and the mediocre, impatient and impulsive traders are weeded out. At the end of the day, only one category—with a small amount of participants—is going to be driving a Ferrari. 

Once you have a realistic set of goals and you actually start achieving them, within your established timeframe, your confidence will get that boost that it needs and any losses along the way will be easier to handle, emotionally and professionally.

2.      Design A Strategy

 

“Discipline is the bridge between goals and accomplishment.” –Jim Rohn

 

So, presumably, now you have a goal—if you’ve been listening. The next step is to create a plan of action—a clear-cut strategy for achieving those goals. It’s one thing to have goals—it’s quite another to understand how they can be achieved. This means that you need to develop a system for trading, your own methodology; something that suits your unique psychology. This system should lay down all of the criteria that you need for both entering and exiting a trade.

Having your own specific trading system …

  • Reduces your decision-making time
  • Takes the repeat guess-work out of every decision that you need to make on a trade
  • Renders mood swings and emotions irrelevant, because you’re following the same system for every trade
  • Gets rid of the psychological pressure you may feel every time you prepare to make a trade

All you have to do is to execute the strategy, consistently.

The main element of any trading strategy is money management or risk management, which you carry out by controlling the size of your trades—which should all be laid out in the criteria for your strategy. The greater the size of the lots that you trade, relative to the size of your deposit, the higher the risk.

A typical trading strategy should also include conditions specified for entering trades based on the signals of indicators, filters, graphic analysis, fundamental news, conditions for exiting trades based on various triggers, as well as take-profit and stop-loss orders, trailing stops and many other criteria.

Always maintain a trading diary, to keep track of every move that you make, every thought that went into that move and every time you did go (or were tempted to go) against your strategy, due to psychological pressure or some other prevailing emotion.

Looking back on your progress, you will find such a diary extremely eye-opening and this will provide the basis of your Phase II strategy, with all of its improvements. This is where lessons learned are put into play.

What should a trader’s diary include? It may include all the details, like entry/exit date, time and price, spreads, commissions, total profit/loss, but these details are not that important, because you should already have the history of your transactions in your trading platform printout.

What is important, though, is to write down why exactly you entered each trade and why you exited it; what signals you saw on the chart and what elements of your strategy made you enter or exit each trade. You may decide not to use your strategy in some of your trades. This is your key to future analysis and trading—of course—is data driven.

3.Persevere

“Success consists of going from failure to failure without loss of enthusiasm.” –Winston Churchill

Or, perhaps more poignantly stated:

“I have not failed. I’ve just found 10,000 ways that won’t work.” –Thomas A. Edison

dont quit

Always rationally accept setbacks in trading—which is probably the most challenging thing to do in this business. Discipline, in the form of perseverance, is an essential element of any strategy. One loss doesn’t necessarily mean that your strategy is flawed. Trading, after all, is not an exact science.

Don’t waste precious time brooding over the past or obsessively second-guessing your choices. Embrace the discipline to take the loss, learn from it and move on. Losses are inevitable and they are the best learning tool to be had in trading. You can’t win big, until you’ve had to sacrifice something.

If you have a solid risk-management plan in place and adhere to its smaller objectives, setbacks will teach you how to be a stronger trader. Remember, you are on a constant learning curve and discipline in trading, coupled with the ability to manage time and expectations, will give you more control over your fears, anxieties and greed.

4. Study … and then study some more

“If you do what you always did, you will get what you always got.” –Anonymous

“The only place where success comes before work is in the dictionary.” –Vidal Sassoon

Study stock market trends—and this is an absolute must. Read what other traders are doing and analyze why they are doing it. Make yourself a list of traders to follow, so that you can detect their patterns and note their wins and losses over a period of time.

Don’t blindly copy them, but take note of their patterns and why they might be successful. Learn from others, including newbies—their mistakes might just forestall some of your own. No one gets anywhere in the trading world without doing their homework and the homework is continual. There is no easy way out here: You need ambition and serious drive.

 

5. Mind, Body & Soul—Keep it Clean, Real, Energized & Organized

 

“Successful entrepreneurs are givers and not takers of positive energy.” –Anonymous

Trading is not an easy profession, regardless of what some perceptions might hold. It is a permanent race for a perfect time to enter the market—an uncontrolled absorption of huge amounts of information and enormous capitals, all whirling around you. You cannot avoid feeling overwhelmed amid this pressure.

A daily route helps phenomenally and daily routines are impossible without discipline.  Let’s face it—some days you just don’t feel like it—and that “it” varies from task to task.  But, if the rest of your life is disciplined and well-organized, chances are very good that your trading will be disciplined and organized as well.  The opposite is also true: if your life is undisciplined and chaotic, chances are that so too will your trading life be.

Sufficient sleep, plenty of exercise and food that feeds the brain are essential, because all of these things contribute to how well your mind is functioning—and how well it can spot the right trade and deal with it rationally. Exercising first thing in the morning gives your brain and body a boost. So, when you sit down to build your new trading strategy, think bigger—think lifestyle strategy—and make a concrete plan for a brain-boosting and energizing daily routine that will jump start your thought processes and position you more clearly for success.

 

 

 

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