3 Simple Ways to Improve Your Trading Discipline

trading discipline

You know you should’ve cut the loss there. But you froze, told yourself it would reverse, and it kept dumping. You said last week this would be the last time this would happen.

But here you are, staring at another big trading loss. You know WHAT you’re doing wrong, but you don’t know how to fix it.

This happens everywhere in life, not just in trading. You know what you SHOULD do. But why do so few people make a destructive decision?

Discipline is what keeps you in the game. 2020 was a year where many incompetent and undisciplined traders made a lot of money. This year you will NOT be able to get away with it.

3 ways to improve self-discipline in trading:

Start Outside

“The way you do one thing is the way you do everything.”

Discipline starts with what you do in your everyday life. The habits you build outside of trading carry over into trading, and vice-versa. If you live a lifestyle where you don’t have a disciplined exercise routine or a diet, it will be difficult to be disciplined in your trading because you’re not used to that type of behavior.

Self-discipline is simply the ability to train yourself to abide by rules or a code of behavior. It usually involves conditioning yourself to do something that you don’t want to do.

Very few people are naturally good at trading. Why? Being a good trader is usually doing the opposite of what all of your instincts want to do.

You need to be used to getting yourself to do things that you don’t want to do, but you know they need to be done in order to achieve your goals, whatever they may be. Build disciplined routines in your life outside of trading, and they will carry over.

It doesn’t have to be exercise or health necessarily, although I’d recommend it to be. It could be as simple as waking up at 6 am every day. Start small, and then scale.

Have Defined Trading Rules

Trading is one of the few professions that have little structure and few rules. You make all the rules and all the decisions. You need to have rules that protect you from your weaknesses and allow your strengths to flourish.

This is not new advice. But yet so many traders don’t have defined, written out trading rules in front of them while they trade. When the pressure of trade is on, it is easy to stray and lose discipline when you don’t have written rules in front of you to keep you in check.

Trading rules are designed to protect your trading account from your destructive tendencies. Here are examples of some trading rules you could have:

For more trading rules I use, check out this blog here.

Focus on Process, Not Just Outcome

This is one of the biggest challenges for aspiring traders. Read this graphic carefully:

The outcome of the trade did not determine if you made the correct decision. By correct decision, I mean if you made this decision 50 times you would be profitable.

Tying this to discipline: You need to develop a proven process to stick to. You cannot have discipline if you don’t have a proven set of rules and behaviors to abide by. Study your trading results carefully. Note the patterns of behavior that are bringing you success. See what’s not working, and eliminate. Plan, refine, execute, repeat.

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