If there are two things that you need in order to become a professional trader, one is to have the knowledge and skill directly related to trading and executing high precision trades, and the other is discipline.
Discipline because you need it to put the skills that you have to practice and actually apply them enough times to gain real mastery over them. But there is more to it. If you want to find out all about discipline in the financial world and the world of trading, then keep reading this article as we will tackle important questions such as what it means to have discipline, why it is necessary to be disciplined, and last but not least, what are some techniques that you can employ in order to grow your discipline in trading.
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What Does Discipline Mean in the World of Finance?
Before we talk about some actionable advice and ways in which you can develop your discipline as a trader, let’s take a quick look at what discipline is and why you need it in the first place and also how it will help you in your trading process.
Discipline itself is rather obvious and clear in its notion. You can imagine what discipline looks like. It is having a strict and serious routine in your trading approach.
If you have discipline in your trading approach, then it means that you have the ability to monitor your trading decisions and keep moving forward no matter under what condition.
If things go south and you sustain losses, then having discipline can help you stick to your plan and trading approach to make sound and reasonable decisions. This can help you avoid fear and the feelings of being overwhelmed by the loss that you have sustained.
On the other hand, even if things are going really good and positively, having discipline as a trader can also be helpful all the same. In this way, you are not overtaken by the excitement and greed that comes with profitability.
In all cases, disciplined traders will be able to remove emotions from their trading decisions and trading process and thus be able to evaluate their trading routine and habits.
This is really important, especially when it comes to adjusting your trading approach and trading plan. You need to dedicate planned intervals in your trading journey so that you can stop and evaluate your trading plan and make adjustments wherever necessary. In this way, with the help of discipline, you can hone and perfect your approach to trading.
Now that we know what discipline is and why it is necessary, let’s see how you can develop it.
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How to Develop Discipline and Become a Disciplined Trader
There are many different ways and methods on how to become a disciplined trader. The following is a list of what we believe to be the most important factors:
- Have a trading plan: always have a trading plan that details exactly what you need to do in the trading process. Your trading plan should be as detailed and specific as possible. It should have strategies for almost any possible scenario in such a way that you are not caught off guard by the market movements, whatever they may be. This means your trading plan should be detailing your entry point, exit point, profit targets, stop loss, all sorts of risk management mechanisms, and naturally your main and alternative trading strategies for different market conditions that you might face.
- Have a trading journal: another crucial pillar of developing discipline is having a trading journal. This journal can be an actual journal or a digital journal. However it may be, you must use your journal to document all of your trading events so that you can use this information to adjust your trading approach.
- Be prepared for loss: sustaining loss is just part and parcel of trading. It doesn’t matter how skilled or experienced you are as a trader, it is only natural to encounter loss from time to time. So you need to be mentally prepared for loss, in a way that it doesn’t overwhelm you when it happens eventually.
- Pay attention to lot size and position sizing: a very important part of growing and developing your discipline in trading is paying attention to the lot size and the whole position sizing aspect of trading. This is because with the help of such approaches you can control the amount of money and capital that you are exposing to market forces. If you do not control these things carefully enough, then the size of your positions can easily get out of hand and that is where you are faced with unnecessary risk and exposure in the market.
- Always be learning: to develop and maintain a disciplined mind as a trader, you need to keep learning as a trader. There is no natural stopping point after which you can forget learning altogether and never strive to increase knowledge and information as a trader. If you are learning all the time, then you can develop your discipline indirectly as a result of the learning process itself.
- Keep your emotions in check: one of the main reasons why we believe discipline is so important in trading is to stay away from emotional decision making. So this means one way you can grow your discipline is by attempting to keep emotions out of the decisions you make in the market.
- Do not fall for herd mentality bias: last but not least, there is such a thing known as herd mentality bias. According to this bias, we tend to do the thing that the majority of people are doing. This is why it is called herd mentality. But in order to have discipline as a trader, you need to steer clear of this bias as much as you can.
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Conclusion
As a trader in any financial market, one of the most important traits and characteristics that you need to have is discipline. You need to be disciplined in your trading approach. In this article we discussed in detail what discipline means, why you need to have discipline, and how you can develop your discipline as a trader in whatever financial market you are active in.
