When reading interviews with Top Traders and Market Wizards (the traders interviewed in Jack Schwager’s books), and autobiographies of the most successful traders, the trait that is always cited as a very important key is discipline.
Why is this the case? It is because trading the financial markets is filled with opportunities to experience:
- Fear of mistake and loss
- Anxiety and worry
- Elation and Euphoria
- Physical and Monetary Pain
When you are hit with this barrage of emotions on an hourly, daily and weekly basis the natural human response is to react in a manner that we are programmed to. Every person is programmed to seek pleasure and avoid pain. Making and losing large sums of money is a massive trigger for pleasure and pain. This means that in a trading environment our natural inclination is to do a number of things that are counterproductive to success:
- Avoid actually taking a loss and keeping the position and hoping it will come back into profit;
- Adding to a losing position to average the loss; ( There is a difference between this and scaling into a position)
- Breaking risk rules when on a winning run; ( so easy to be seduced)
- Cutting a loss even though the loss is not near our stop loss.( Fear)
- And so on.
It is because of these swirling emotions that discipline is so difficult to maintain. But it is critical to long term success.
I would not dare abandon them, So we keep to our risk rules unless we as a trio discuss why we wish to make an exception to our risk rules.
For a general outline of the importance of self-discipline and how you can change undisciplined behaviors into disciplined ones see: we suggest enrolling at the AceGazette.