Discipline as a Trader

When you read interviews with Top Traders and Market Wizards (the traders interviewed in Jack Schwager’s books), and read autobiographies of the most successful traders, the trait that comes up over and over and over again as the most important for trading success is Discipline.

Why is this the case? It is because trading the financial markets is filled with opportunities to experience:

  • Greed
  • Fear
  • Anxiety
  • Worry
  • Elation
  • Euphoria
  • Pain
When you are hit with this barrage of emotions on an hourly, daily and weekly basis the natural human response is to react in a manner that we are programmed to. Every person is programmed to seek pleasure and avoid pain. Making and losing large sums of money is a massive trigger for pleasure and pain. This means that in a trading environment our natural inclination is to do a number of things that are counterproductive to success:
  • Avoid actually taking a loss and keeping the position and hoping it will come back into profit;
  • Adding to a losing position to average the loss;
  • Breaking risk rules when on a winning run;
  • Cutting a loss even through the loss is not near our stop loss.
  • And so on.
It is because of these swirling emotions that discipline is so difficult to maintain. But it is critical to long term success.

Let me give you a personal example. I used to have my risk rules written on my wall. They governed how much risk I could have in the market at any one time. However a few times a year in periods when I was making a lot of money I would deliberately break my rules. This happened once too often I got crushed, and in one night I lost over 20% of my capital. I thought to myself, this is ridiculous, I have risk rules but I don’t keep them. So I emailed two people I have huge respect for and I asked them to be my trading accountability group. I emailed them my risk rules and I committed to them that I would not break them. I would not dare disappoint them, and so I have kept to my risk rules ever since then.

For a general outline of the importance of self discipline and how you can change undisciplined behaviors into disciplined ones see:


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