Importance of Discipline in Trading

This article aims at an important quality set that a trader must develop to be a successful trader. Discipline lays the foundation for creating a broad trading strategy. How do you define discipline in trading? It is the ability to stick to a set of rules and a broad trading plan, irrespective of the market conditions you face. Discipline is what makes trading strategies successful. Discipline is the foundation of your investment and trading strategy whether you are a day trader, scalper, or position trader. 

Is it a way to achieve consistent profitability?

Hundreds of traders enter the market every day, but a majority of them fail. They face psychological weaknesses like taking profits too soon, overtrading, or trading anything that comes. It is because they often get bored of ranging markets. To get profit, self-control is vital, and discipline teaches you that. Active trading comes with lots of risks, and without adopting discipline in your trading, you can’t cope with that. A lack of trade discipline can make a solid trading system and risk management rules lose their worth.  

The market is ruthless. It won’t forgive even the best traders for making the smallest mistake. The way to avoid mistakes in the future is to be disciplined. There is a saying that “A winning trader is always disciplined, and a disciplined trader is a decisive trader.” So, winning traders control their impulses which allows them to execute a trading strategy effectively.

One might think, “what’s wrong with leaving the trading plan if I can make money anyway”? Remember making an occasional profit by throwing your trading plan aside provides short-term pleasure. After getting occasional successful trading, you may start believing that abandoning a trading plan is not a big deal. You may be prone to take another chance, but a lack of discipline will lead to long-term losses. 

Following the plan sometimes and abandoning it other times will throw off the probabilities, and you will end up losing overall. Therefore, maintaining discipline is crucial for profitable trading, and it can’t be stressed enough. 

How does Discipline give success in Trading?

By applying discipline and having a well-structured approach, traders will become more efficient and resilient to different market conditions and reap positive results over time. Furthermore, a structured strategy will hinder other threats like overtrading, loss of an opportunity, closing winning trades too soon, and moving stop losses to avoid a loss.

The market is always there to provide you with opportunities, but they ought to be availed only when they meet your trading strategy and intended risk-reward ratio.

Following are some steps you can take to be successful in your trading journey.

Step by step guideline to achieve discipline in trading

  1. Make a trading plan based on your needs and market knowledge.
  2. Always follow your trading strategy.
  3. Apply adequate risk management techniques by sticking to stop loss and taking profit orders. Understanding and managing risk in every trade are crucial for well-structured trading.
  4. Creating a trading schedule  
  5. Identifying the signals that will help in deciding when to enter or exit a trade
  6. Keep and maintain short-term and long-term goals.
  7. To maintain discipline, you must control emotions like greed and fear.
  8. By practicing some self-control, discipline can be mastered. 

By practicing discipline in trading, you will discover that you are much more confident and prepared for market fluctuations which will help you in gaining greater profit over time.

As a single footstep will not make a path on the earth, so a single thought will not make a pathway in the mind. To make a deep physical path, we walk again and again. To make a deep mental path, we must think over and over the kind of thoughts we wish to dominate our lives.

Henry David Thoreau