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Top Ten Reasons Traders Lose Their Discipline
Losing discipline is not a trading problem. It is the common result of a
number of trading-related problems. Here are the most common sources
of loss of discipline, culled from my work with traders:
10) Environmental distractions and boredom cause a lack of focus.
9) Fatigue and mental overload create a loss of concentration.
8) Overconfidence follows a string of successes.
7) Unwillingness to accept losses, leading to alterations of trade
plans after the trade has gone into the red.
6) Loss of confidence in one's trading plan/strategy because it has
not been adequately tested and battle-tested.
5) Personality traits that lead to impulsivity and low frustration
tolerance in stressful situations.
4) Situational performance pressures, such as trading slumps and
increased personal expenses, that change how traders trade (putting
P/L ahead of making good trades).
3) Trading positions that are excessive for the account size, created
exaggerated P/L swings and emotional reactions.
2) Not having a clearly defined trading plan/strategy in the first
place.
1) Trading a time frame, style, or market that does not match your
talents, skills, risk tolerance, and personality.
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THE
PSYCHOLOGY OF TRADING
1. When you feel most frustrated at missing moves, you are most
vulnerable to losing money and trading in a self-destructive manner
(hereon called "trading on tilt" to quote Charles Kirk from the Kirk
Report). Do not let it play with your head. Every trade is fresh.
2. Do not over think or get spooked — stay as close to neutral as
possible. Don’t pre-decide anything, just look for your conditions to
be met. Calmness is everything in this profession — in the technical
setup system itself and in your own emotions.
3. Remember many big losses have come after innocent small initial
losses and then from attempts to make up that loss. You can become
frustrated (by forcing trades), do lousy setups with no volume,
chasing spikes, or even worse, following other people’s trades.
4. If you get stopped out and are feeling frustrated, then the market
most likely is in “no win†| |
