Discipline of the trader
Discipline (in Latin “disciplina” - consistency, rigor) - the tendency to fulfil certain norms of behaviour and strict implementation of the rules.
The success of any trader depends on his discipline. The trading strategy is established by the trader himself, but the general rules of trading behaviour could be expressed in several theses:
- planning of each transaction and trading strategy;
- work on a clearly predefined plan;
- control of emotions.
Let's analyse each point of the trader's discipline
Planning each transaction
Initially, you cannot be sure that an open transaction will bring profit. But if you open trades wisely and follow the trading plan, the chances of gaining profit grow.
For this it is necessary to have a clear, well-thought-out plan for each transaction:
• identify the instruments and asset classes that you will trade;
• assess potential market volatility;
• determine the moment of entering the market;
• determine the moment of exit from the market;
• establish a level of take-profit, in order to fix the potential profit;
• set a stop-loss level to minimize potential losses;
• control the overall risks and the volume of each position in particular;
• assess the probability of profit by mathematical and statistical methods;
• diversify trading methods and asset classes;
• analyse trading results;
• if possible, back-test trading strategy on the history before the actual trading begins;
Work on a clearly defined plan
Best to begin trading with a minimum volume and a minimal leverage. If you get a stable earning, then after that you can increase the volume of the transaction, in order to increase earnings. It is incorrect to believe that having a large reserve of funds on a personal account, you can immediately trade in large volumes with a maximum leverage. This right must be earned.
Even if 9 deals out of 10 you conducted according to the established plan of action, and one of them still gets knocked out, then you do not observe the discipline of the trader and you have something to work on.
Periodically, on the market there are situations when there are no signals for trade, and if there are, they are very weak. Traders start to get bored and start trading without an idea and plan. Such actions will lead to losses. In these situations, the right decision will be to take a break, analyse the market and determine the direction of the trend, after which it will be possible to turn back into trading.
One of the most dangerous states is the desire to recover the negative trading results, to which the trader has gone. In such situation, "in pursuit of happiness," the big mistakes are made, since emotions come into play.
Remember the main idea: you can not win back in trading. More precisely, it is strongly discouraged. From the desire to return, as a minimum, the previous balance on your personal account, you can jump sharply into a state of excitement, which will bring you even greater losses. Past trading results should not influence your future decision.
In professional jargon, this is called “tilt” - a condition caused by strong positive or negative emotions, in which the trader begins to move away from the usual plan in the trade and begins to make mistakes.
It is good practice to overcome the state of tilt, it is a quick switch to some occupation. There is no universal occupation, for everyone it is its own, whether it be meditation or sports. The main thing is to move away from the terminal and distract yourself.
Discipline of the trader must be executed in every transaction, every trading day. Trading helps to improve your personality, as the loss of own funds can become a significant stimulus to acquire useful skills of self-discipline.
Trading is the sphere where strict compliance with rules is required as nowhere, in fact, the ability to comply with the rules - is required basis for survival in the market.