Trading discipline is vital if you want to not only trade successfully but also reduce the day-to-day stresses of trading. Having good discipline allows you to devise a strategy and stick to it, regardless of emotional factors. You trade based on your plan and objectives, irrespective of whether you are feeling optimistic or pessimistic, cautious or adventurous, emotionally settled or overwrought.
Trading discipline will stop you from being influenced by outside factors and allow you to be consistent and strategic. While there are no guarantees, good discipline is part of what helps successful traders both make profits and limit losses.
Alongside a solid trading system and sound risk management, trading discipline can help make trading easier and less daunting, even for newer traders. The good news is discipline can be learned, and improved, at any time.
Discipline can be developed by carefully studying the markets and devising a plan for your trading activities. From an emotional standpoint, traders must learn to use self-control, practice patience and control natural impulses that can impact trading decisions, such as greed, excitement, and fear. However, if you have been studying the use of discipline in trading, you will know there is a lot more involved in learning how to successfully trade forex than simply knowing how to master your emotions.
There is a more tangible and technical side to discipline too. Trading discipline is all about learning to stick to a trading plan and knowing what signals will help to decide to enter or exit a trade. If you use technical analysis and trading signals to determine when to open and close positions, then you have to learn to rely on those processes, as opposed to trusting what may feel like intuition or a ‘gut feeling’.
Proper trading discipline means you never enter trades based on a whim. In fact, you always know exactly why you are entering into a trade. Decisions are made based on whether the trade meets the rules you have decided you will follow while trading. Trading discipline includes setting a price target at which you will take a profit, and a level at which you will accept that the trade has gone against you and is losing money so it is time to cut your losses.
When it comes to practicing good trading discipline then, we are talking about things like using a good combination of technical indicators and quite possibly combining this with some fundamental analysis, then devising a plan and setting the right stop loss and take profit orders.
When you look at it like this, the concept of trading discipline becomes less about fuzzy ideas such as ‘controlling your emotions’ and more about getting the more technical aspects of trading right, putting everything in place, then having the self-control to stick to your plan.
Devising a trading strategy, having the tools in place to support that strategy, and consistently sticking to it, will enable you to have control over your trading and your emotions, and ultimately lead to more consistently successful trades.