On being disciplined

Whenever I run a Traders’ Camp, there are campers who ask for help in acquiring discipline. I sometimes joke about tying people to the palm trees for physical discipline. Jokes aside, the question remains how to maintain discipline after one graduates from a Camp or finishes reading a book. Let us consider several essential points:

• Some traders are destined to fail The markets produce endless temptations. People with a history of poor impulse control are likely to get nothing but grief when they try to trade. Those who are actively drinking or using substances are highly unlikely to succeed as traders. They may have a few lucky trades, but their long-term forecast is grim. I have written about applying the principles of Alcoholics Anonymous to trading in my first book, Trading for a Living. If your drinking, eating, or some other behavior is out of control, you are better off not trading until you resolve your addiction problem. Obsessional nit-pickers or greedy people who cannot tolerate losing a dime are unlikely to do well in trading.
• Keeping records: actions are more important than promises
It is easy to talk about discipline on a weekend, when the markets are closed, but let me see you in front of a live screen when the markets are open. All your promises and good intentions will not amount to a hill of beans—unless you act to implement them. This is why I keep repeating that good records are essential for successful trading. You must write down your trading plans and compare your performance with those notes. We are just about to discuss a simple system of record-keeping. Your ability to follow that system will be an excellent predictor of your success or failure. If you keep good trading records, you will be very likely to succeed. If you fail to keep good records, your chances of successful trading will be slim to none.
• Solitude is essential Many people feel stressed by the markets. They respond by huddling with others, following them, and aping what other people do.

To become a successful trader you must make your own decisions. You will need to insulate yourself from others while you make your trading plans and implement them. This does not mean becoming a hermit—it is a good idea to network with other traders. But you may not talk about your trading plans while you are making and implementing them. Stay alone with your trade, learn all you can, make your own decisions, record your plans, and implement them in silence. You can discuss your trades with the people you trust after those trades are closed—but not a moment sooner. Many people fear solitude, but you need it for trading.

As my late grandfather used to say, “The road to Hell is paved with good intentions.” Even a responsible person can lose his bearings in front of a live screen. It is not enough to promise to be good and disciplined. You need to write down a plan and follow it when you trade.
You need to complete a trading diary after each trade and record the consequences of your actions. It is also important to remember that if your discipline occasionally fails, it is not the end of the world, but a reminder to return to the right track. If you slip up while trying to stay on a diet, it does not mean that you can drop the plan and pig out. Just correct your slip and return to the original plan.

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