Many traders struggle with discipline. The reason is due to lack of foundation in education, guidance, and experience.
Discipline is one of the most important factors in trading, and yet it is the least thought about by traders. So how can we build discipline?
Before we get into the discipline part, we need to understand that trading the markets requires an approach: “Strategy.”
If we do not have one, then obviously we are going to blow up accounts.
Every trader is different. What works for one person may not work for you. This is why people are desperate to create a winning algorithm, with no intervention. Of course, it is possible to do so in this day and age, but why do even the biggest hedge funds end up making losses sometimes? At the end of the day, even with the best of professionals, you will have losses. So accepting that we will have losses is important to carve in.
Most pro traders average a 50% win rate, and some famous ones even less. However, managing the risk is the important thing, and not so much the win rate. This does not mean you should have a bad win rate, but it is important to understand that making profits depends a lot on risk management with a proven strategy.
Strategy must be mechanical and solid, with rules and a track record! If you haven’t already done so, it’s a good idea to watch this video: https://youtu.be/3XbXMb5vTTU
Strategy
Your technical analysis should be done first, and it should answer all of the below:
1 – My bias: am I a buyer or a seller?
2 – What are the price levels I am going to enter the trade at?
3 – The target I am expecting to reach?
4 – Where is the stop loss to be at? My risk! Where am I going to get out if I am wrong?
5 – Is it worth it? Risk-to-return ratio.
Only if the trade is worth it can I enter the trade. What is a “worth it” trade? Definitely should not be less than 1 to 2 after costs of the trade at least. I like to target at least 1 to 3 to ensure less but more selective trading.
Once your strategy is set, once you have your rules written down, you now need some grit to the 90 trades.
We are going to divide this into 30, 30, 30.
Once you apply your strategy to 30 trades with the rules exactly, you will review your journal to make a summary of the points that worked and did not work. If necessary, here we can make minor changes in our trading, but there should not be major changes since the strategy is already solid. The changes should be with respect to how I apply it because I will find trades where I may not have done it exactly by the book. This is why journaling your trades is important. Here is an article on journaling the trades: https://globaltrader.club/the-trading-journal/
If you get through the first 30 trades with consistency, then the next 30 trades should be easier, but you should still be on top of your game, and every trade should be intentional with the strategy.
Once you are done with the second round, check if there are any areas where you messed up. By this phase, there should not be any major mistakes at all! You should be in complete alignment with strategy and application.
The last 30 trades is your complete new self. By this time, there should not be anything to change at all. You should be trading like a machine.
While going through this process, you must ensure that you are not rushing trades, and it is not a matter of getting things done quickly but with intentional action and trades. Don’t let your ego get in the way — trade intentionally!
The routine by now should be stable.
