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AN INSIGHT
TO DAY TRADING

7 STEPS TO BECOME A MORE DISCIPLINED TRADER



DEFINITION OF DISCIPLINE​

  • The practice of training people to obey rules or a code of behaviour, using punishment to correct disobedience.

  • The controlled behaviour resulting from such training.

  • Activity that provides mental or physical training.

  • A system of rules of conduct.

(Source: Lexico)

Discipline is undoubtedly one of the most important character traits a trader needs to be successful. A lack of discipline is often the cause for most mistakes such as breaking rules, making impulsive trading decisions, violating risk management rules, revenge trades or over-trading – just to name a few. All these things inevitably lead to greater losses than originally expected or would have been necessary.

The following seven steps aim to facilitate trading discipline. It can be learned and is best aquired by making mistakes, recognising them, and not repeating them.

"You can never make the same mistake twice because the second time you make it, it's not a mistake, it's a choice."

(Steven Denn)

STEP 1

​Have a trading plan and do back tests. The goal should be that you develop confidence and a strong understanding of your trading strategy. Once you know and are certain that your trading strategy is working, you can apply this plan for you.


Analyse your markets based on your trading plan. Zoom out, mark important levels and get a complete overview of the respective market. Think about different trading scenarios that might arise from your trading plan and visualise them. When the market opens, wait for your specified levels. Those areas are the only ones to execute trades at. This approach helps to avoid impulsive trades and entering the market too early - if you have your plan and notes permanently in front of you, you will have to consciously and actively break your rules in the event of misconduct.

"Trading opportunities are like trains, there is always one coming"

STEP 2

​Make a checklist. A checklist lists all the criteria that are relevant for entering / exiting the market. Every time before you enter a trade, go through your checklist and check things off. With a checklist it becomes immediately obvious whether a trade complies with your rules or not. It makes you think again about whether we will go into the market or not. This "barrier" between the market entry and the final mouse click prevents impulsive trades and over-trading. A checklist visualises the criteria which makes it easier to follow them. Make yourself aware that you alone have total responsibility for your actions and their results. Look at this from all angles - you are 100% responsible for your results.

STEP 3

Think about both ways of trading - it can always work for you or against you. If you have agreed on both options with yourself before entering trade, there are no surprises - expect the unexpected. A trade that moves against you will not make you nervous because you have already dealt with this possibility and the possible loss in advance.

"There is only one side of the market and it is not the bull side or the bear side, but the right side"

(Jesse Livermore)



STEP 3