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I recently heard from a trader
who told me he has been having problems with discipline in
his day trading. He knows how to trade, he knows the
setups he needs to be looking for in the charts, when to
enter, and when to exit. His trouble is in having the
discipline to wait for only those setups and not to take
half baked trades in the meantime.
This is a very common
problem for traders, I imagine everyone goes through it at
some stage in their career. In working with student
traders over the years, I have noticed a phenomenon that I
think explains one of the reasons for this lack of
discipline. When I watch student traders trade, they tend
to sit very patiently and explain to me what they are
seeing on the chart in front of them. When they see a
valid setup come along, they can quite happily tell me
what the setup is and how they plan to trade it, and
subsequently they will execute the trade accordingly. When
the same student is trading alone, they start taking all
sorts of off-plan trades, setups that aren’t really
setups at all. It seems that the difference when trading
alone, is that the trader suddenly has no accountability.
If they have someone looking over their shoulder keeping
them in check, everything is fine. They know that if they
take an off-plan trade then they will have to explain to
me why they did so when it all goes horribly wrong.
Trading at home alone, the trader is accountable only to
themself, and they are probably not going to give themself
the same hard time I would if they didn’t follow their
trading plan to the letter!
So it seems that one of the
benefits of trading for a living, that independence from
the boss, can actually be a hindrance at times. Short of
hiring a manager to stand watch over them, what can a
trader do to overcome this lack of accountability in their
trading? One method I recommend is to give a running
commentary out loud throughout the trading session, as if
talking to a mentor. Explain what you are seeing on the
chart, where you think a trade is setting up and why, how
you will enter, how you will manage the trade, and where
you will be exiting wherever the price subsequently goes.
When talking out loud you use a different part of the
brain than when simply thinking to yourself, and that can
have surprising consequences; it’s easy to talk yourself
into a trade that you want to take even though you know
it’s not quite right, but talk through it out loud and
you’ll hear yourself making excuses and quickly see the
error you are about to commit. I know talking to yourself
sounds a little odd, but it really works.
Another option for making
yourself more accountable for your trades is to join a
chat room. There are loads of them about, plenty of free
ones as well as some paid ones which call trades in real
time (I wouldn’t recommend those by the way, they are
often run by people front running their own calls). If you
find a decent room and commit yourself to calling your
trades in real time, knowing that you will have to explain
to the room exactly why you just took that really stupid
trade will really make you think twice about taking it in
the first place.
These are two simple ways
of making yourself more accountable for your trades and
therefore enforcing more discipline. There are many more
interesting ways of increasing discipline as a personal
skill, and I hope this article will have given you some
ideas to start developing your own methods.
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About
The Author
Harvey
Walsh is a full time day trader and part
time trading tutor. He can be contact via
his website www.day-trading-freedom.com. |
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