In trading, by trading I refer to any variation thereof, be it, sports, futures or forex etc there are several elements or components that will crop up time and time again. You will read the work of hundreds of ex traders and authors attempting to clarify these topics but they will either be too brief in explanation or literally melt before your very eyes into a puddle of unfathomable trading jargon.
Discipline is certainly a pre requisite when it comes to trading education, perhaps even the single most important lesson you will ever have to learn. According to 90% of traders, discipline is the priority when starting out in the world of trading and is key not only to their own success but to the success of many other traders like them. Discipline will ultimately separate the winning trades from losing trades, the successes from the failures and perhaps more prominently, green from red.
When I first learnt of the opportunity to trade the sports markets and the benefits this presented, all I wanted to do was take on board as much information as possible and to become more familiar with trading the sports markets as a concept in general. For the whole of the first year all I was interested in was studying the markets and paper trading as many new ideas as I could. I flirted every now and then using real money and experienced mixed results, however, this flirtation was never going to blossom into a relationship and eventually the inevitable happened and I blew my bank. Although my bank was reasonably small this proved to be a very valuable lesson indeed and encouraged me to study even more. Until this point the only aspects I had been focusing on were the most obvious areas like strategies and the actual mechanics of trading such as backing high and laying low, in essence, the very basic elements.
Discipline as far as I was concerned was a completely unrelated subject to sports trading and as such never even considered that practicing good discipline might increase profitability and have dramatically positive effects on my trading. Realising that something was missing from my current skill set, something that could have the potential to completely reverse my fortunes, I began looking further beneath the surface of trading and learnt of a whole host of subjects that unfortunately had been swept under the carpet somewhat. When people spoke of trading sports they preferred to try and catch the eye of newbie’s with the more glamorous subjects like, "greening up", "Win no lose bet" and the old favorite, "pretty little screenshot"
The Topics I am referring to are known as mental skills and discipline is right at the top of the list. Not until the last few years has discipline in sports trading really been paid much attention and although this and other mental skills are of the utmost importance they were formerly only really discussed when referring to more conventional forms of trading.
Some sports traders, in particular new sports traders very often fail to see the link between trading the sports markets and trading these more conventional markets, however the similarities between the 2 are startling and incorporating the mindset of established traders into your sports trading is a tactic that will ultimately pay dividends.
Regardless of what it is that you are trading, you are still trading and therefore must apply the same mental techniques to the sports markets as a city trader would to his/her own trading environment. What is good for one is normally good for the other.
As a sports trader, it is paramount you consider yourself a trader nonetheless and try and eradicate this inferiority complex from your mind or else you will really struggle to make a living as a trader. If you cannot adopt this approach then subconsciously, you will never be able to take yourself seriously as a trader and therefore lack professionalism which will only ever result in a negative balance.
Signs of indiscipline are very obvious if you allow yourself to take a step back and review your methods. (Which I recommend you do often) You can easily spot these signs as they commonly manifest themselves in the following ways:
- Watching a red getting bigger and bigger without taking action.
- Not accepting a green in hope of a bigger green.
- Trading for excitement or entertainment
- Blindly following the herd / making decisions based on others opinions
- Deviating from your trading plan
- Letting previous failure negatively effect future trades
I would say that at one point or another I have personally been guilty of all of the above along with many others but in my honest opinion I believe that you have to suffer from trading impurities at some point in order to appreciate the importance of not having them. I acknowledge the level of difficulty that overcoming ill discipline brings and I empathise. On the other hand though, I also know of the abundance of rewards that await you on the other side once you have successfully jumped this hurdle. Fortunately there are many ways to combat indiscipline but overcoming such a critical factor in unsuccessful trading takes patients and complete dedication.
The first step, like most problems is realising that poor discipline is playing a pivotal role in your decision making. Are you thinking things that deep down you know are going against everything you know you should be doing? When I started out I knew that some of the decisions I was making were very poor but the urge to continue regardless was a much more powerful force than the instincts that were telling me to, "not enter here" "scratch this trade" or "take this small loss and get out". I knew that I was trading in a very erratic manner yet was not changing my approach at all. In hindsight, I can pretty confidently say that I was attracted to the "chance" of the market reversing and watching the red turn into green and then keep increasing or..What if this horse wins? I could make the maximum that my stake allowed......GAMBLING is what I was doing clearly, however, in my mind I was still a trader. I had actually dressed up my foolish antics to convince myself I was better than a bookie dwelling chancer....the reality though, I wasn't.
The point is I realised that this was a massive problem and that I was never going to achieve any type of success with my current mental approach. I began isolating each individual flaw that I knew I had and writing them down with a hypothetical remedy.
example,
To combat the attitude of not accepting a small profit in the hope of the current profit getting bigger, if your trading plan stipulates an exit of a particular trade with 50% return on investment (ROI) then that is where you must exit, put an order in at the desired price that will return 50% knowing that if this price is reached you will automatically be closed out of your position and therefore eliminates any human emotion from the trade. This is obviously a very primitive example and clearly as you become more confident in your own decision making this will not be necessary but if your reasons for taking the position in the first place are fundamentally sound, your balance will continue to grow and exit points will become second nature thus deeming the original issue obsolete.
To summarize, discipline is a vast subject and will affect different people in very different ways.
A good tactic I used to employ to find any weaknesses in my discipline that maybe I hadn't picked up on myself was to record the trades via some screen recording software. You can then later review the trade from start to finish without being in the heat of battle and walk yourself through the mental process of why you did certain things, why you didn't do others and what you could have done differently to improve your trading. This approach can be extremely useful for tweaking problems and really highlights any flaws in your discipline as by the time you review the trades you have normally returned to a rational mindset.
Discipline, although arguably the most important area of trading is only one of several cogs you need to have in place in order to trade successfully.
The critical areas of trading, sometimes referred to as the pillars of trading include,
- Discipline
- Money management
- Research
- Trading plan
These are in my opinion the 4 main areas of trading and mastering these are what every trader starting out needs to try and do. The Key lies in finding a balance between the 4, which will in turn show a dramatic improvement in the way you go about your business. After all, that is what trading is....a business... not a hobby.
Regards
Fluffnut
