Hi all, Today I compiled my second version discipline list. I would like to learn from your disciplines. And more important, I would like to know how you force yourself disciplined. I know this is an old topic, but I would like to know your fresh ideas, at least fresh to me. My discipline list: Must use stop loss. Absolutely forbid enlarging stop loss. Absolutely forbid revenging trade. Absolutely forbid guessing the price direction. Only trade based on the facts, such as price action, indicators, etc. Absolutely forbid lucky expectation or second guess. When the price is confirmed going against current positions, exit the positions without expecting the price goes back to hit BE or TP. Any more? How can I force myself disciplined? Or how do you force you disciplined? It's much much more difficult to be disciplined than just listing several items. That's also why there are so many mentors on the internet who live on selling courses rather than trading. Yeah, easy to say, hard to do. How do you force you disciplined? How do you improve yourself to be disciplined? Any executable approach to do some exercise? The approaches I can think of, but may be not quite acceptable: 1, Punishment. I received one punishment and now I learned the lesson. I used stop loss firmly when I began trading, then I "learned" that no stop loss can increase the win rate. I tried no-SL then got 20%~30% float draw down (eventually took profit by 2% by luck). After that, I would never not use SL any more. (I had a topic about this on ET) This kind of punishment should work well, but the cost may be too high. :-( 2, Trade more and be in the market all the time (by being in the market, I mean monitor the market, not trade all the time). Any more efficient approaches?
Discipline is a result of training and repetition, not "forcing" yourself to do things. Law enforcement and military train like this all the time. Their goal is simple: put officers/soldiers in situations similar to real-life deadly situations so that when real life happens they don't panic but react based on their training. I'm not sure what psychology books you've been reading, but punishment is the exactly wrong approach for training. Positive reinforcement is a way more effective teaching tool, everything from training dogs to learning welding. Viewing losses as a punishment/training tool is completely wrong.
one of the issues you face and that all of us face is there is no personal accountability or consequences to you not being disciplined. Humans are quite predictable in many ways let me illustrate this by way of example. I don't know which country you reside in but lets take the example of one of the developed countries. What would happen if we removed the rules and consequences for not paying tax? If overnight we changed the tax rules and said from tomorrow you can pay whatever tax you feel is right and there will be no consequences if you don't pay. The result would be a complete breakdown in the countries finances. Now consider your own trading account, most people know sensible rules. eg. daily stop limit weekly stop limit, size down on set drawdown, no revenge trading not taking trades to plan et cetera. There is nothing to stop the trader from breaking the rules without consequences. The trader can reload account/average in/over trade/revenge trade. Once a major lapse of discipline occurs we then tell ourselves 'ok this time I will follow the rules' rinse repeat. This is why I like the rule set and enforced discipline provided by companies like Top Step trader. I think it can promote good habits eventually those good habits become ingrained in your psyche. Of course for some they can never become disciplined enough to make it and the cold hard truth is that for those people trading is probably not for them. Good Luck.
I reward myself for decreasing the psychological impact of trading results: When taking conscious control of psychological volatility, a reward is given. In this way the variance decreases with time and practice. E.g. Closing the trade two points before your stop is hit, merits reward. When the market is moving against me, psychology is the most important factor. Training and breaking bad habits results in a huge profitability increase. As you train, as you improve control, you enable logical decision making under pressure.
good post Tavurth. Getting the rational part of the brain to win the battle against the emotional part greatly aids profitability. I am a big fan of Prof Steve Peters and his work on this detailed in 'The Chimp Paradox'.
"The Chimp Paradox" is excellent as well as another book called "The Power of Habit". Here are some excerpts from it: https://www.goodreads.com/work/quotes/17624817-the-power-of-habit The key to changing "undisciplined" trading habits is to identify the triggers (thoughts and feelings with regard to certain experiences, such as price moving against your position, getting stopped out at the high or low tick of a swing, suddenly thinking of reasons why a stop loss should be made larger to give a trade "more room to work", etc), then disrupt the routine ("bad habit") by doing something different. So let's say you find yourself "revenge trading" whenever you're stopped out for a loss close to where price starts to pull back. Human nature says you're likely to keep trading in the same direction as the original trade so you can "get back what the market took from you" and your emotional state (your belief at that moment) is blinding you to the fact that your stop loss was placed based on your thesis being invalidated at that level and you should be now waiting patiently for a new signal and quite possibly looking to trade in the other direction. The pullback that sucks you back into a position is often an opportunity to get in at a good price the other direction. But you end up trading emotionally and at the end of the run of losses you took against the new trending move, you look at a chart and suddenly you see everything clearly and think "WTF did I just do???" OK, to change this habit, instead of making a rule that says, "Absolutely forbid revenge trades", you make a rule that actually disrupts your ability to revenge trade: When stopped out for a loss, I will immediately take a 5-minute walk outside, do twenty jumping jacks, then go back to my desk and wait for the next signal. Now you've disrupted the routine that leads to a mess. Basically, the key to change is to create new routines to disrupt/replace the negative ones. Once you've repeated the new routines enough times, they become your new positive habit.
Seems "The Chimp Paradox" and "The Power of Habit" are quite good. I will order the paper version. Thanks for the recommendation. And more books do you recommend to help being disciplined and emotion control? EDIT: I just found "How Self-control Works" by Kelly McGoniga, "Thinking, Fast and Slow", and "Black Swan" are good and I will order them too. Seems I will be busy on reading for some time, nice! Beside the above books I'm gonna to buy and read, I've read "Trade In the Zone" and "Fooled by Randomness". Not any books or any person taught me to punish and I dislike punishment too. I don't performance any punishment on other persons. Indeed I think punishment is harmful in any team work. But for trading, I would like to give myself more pressure, so I don't mind to use the word "punish" on myself, it's not harmful . I agree that losses should not be treated as punishment, but extreme fear on large losses may help to make me to avoid repeating same mistake (not using SL, in my case) again. Very good and practical idea, I will try it, thanks! Sorry I don't understand very well. Mind to elaborate how you reward yourself? Thanks
I believe in my heart that men only make changes when there is enough physical or mental PAIN. And until they reach that individual level, they will continue to do as they always done. I don't use protective stops when day trading, that for whatever reason makes me not concentrate as well. I watch the Dome much of the time watching for patterns of continuation or stalling out around areas I either need to get out for losses or to grab few more ticks than 2.00 point targets in ES, I always hitting bids/asks for entries instead of putting in limits, again watching Dome, I can see by speed of volume disappearing if I can get in better. I think forcing punishments from losses is bad for the brain, losses are to be forgotten and concentrating on not losing for me works better, thinking of ways of coming out to plus one tick and averaging down works well for me, but must realize, there is always an "Uncle" point of taking the loss. Keeping minimal money management rules that work for you easiest way to keep doing them whereas more or hardest to figure out will be much tougher to continue to do them. I have 8 MM rules and have them printed large on card board inside plastic taped to laptop. Learning to accept that the trade you are in will be one of thousands, might as well stop changing the rules. One thing that worked well long ago, like a child, I use flash cards I made, patterns for entry and many more for patterns to exit, so many years of going through them as I made more of them, I flip through all the different occurrences of a pattern and in idle time, I have my stack of flash cards.