The “D” Word
For months, the market has offered fewer intraday trend moves, and more intraday reversals with narrow ranges. Tuesday was such a day, with the morning being choppy but positive, and an intraday reversal that made bulls’ hooves curl. When this is the case, it’s always a good time to review your trading style as well as your discipline.
While it is very important to have a sound stock trading strategy, it is equally important to have discipline as a trader. The word discipline has been used many times in reference to trading, and many ignore it completely as an overrated weapon in the trader’s arsenal. After all, they see magazine ads or get junk mail advertising a trading system with an incredible track record that can solve all of their problems. However, it still takes discipline to follow a system, whether yours or someone else’s.
So, what are some applications for discipline? What will discipline do for a trader? For starters, it can allow you to stay in the game. A disciplined trader will not allow losses to snowball and wipe out the trading capital which is required to play the game of stock trading. Discipline can help trader make money. If the idea is to “cut losses and let profits run,” then the disciplined trader allows those profitable trades to continue working. Human nature urges us to take profit when we see it, but we will rarely come out ahead in the trading game by giving in to such urges, so discipline can help. Discipline can also help the trader know when to trade and when not to trade. By having the discipline to make and follow a game plan, a trader can capture profits during markets which offer opportunity, and protect capital during times which do not.