How to Strengthen Your Stock Trading Discipline

Discipline is a learned skill that every successful trader possesses. he or she has a set of rules (yes, rules) and lives by them through thick and thin.

The undisciplined trader is guided largely by emotions, and spends much of the time excoriating himself because he “knew” he shouldn’t have made that trade since it came back to bite him in the butt.

Learning Takes Time

If you hang around stock trading long enough, you’ll either learn this skill or lose so much money you’ll give up trading as a lost cause. How long it takes to develop this trait is, I think, purely a matter of how much money you’ve got, how badly you need more, and how much pain you can stand.

If you cash is tight, if you actually need the cash that stock trading could provide, if you have a low threshold for financial pain, then maybe you’ll learn your lessons early on.

On the other hand, if you’ve got a lot of money, if you’re particularly hard-headed about shooting from the hip, if you’ve got a high threshold for pain, it might take you years to figure out there are better ways.

In the meantime, you’ll discover that bull markets reveal your true stock trading genius, but drifting and choppy markets hide it. And if that sounds like you, start now to strengthen your resolve to trade only the money-making opportunities. Don’t mess with Mr. In-Between.

Start by Tracking Your Trades

The place to start learning this discipline is to keep a log of your trading activity and especially, how many times you break an important rule. Maybe your downfall has been trading stocks before 10 a.m.—before the market has made up its mind which direction it’s going. If that's your rule and you've been breaking it, start applying pressure on yourself to refrain from making trades during this dicey period and log the number of times you successfully stop yourself from doing so.

By becoming aware of your undisciplined behavior, you give yourself a leg up on eliminating it. Tracking your success (and failure) over time will help you gradually eliminate the behavior since, over time, you’ll develop the psychological skills necessary to turn a cold should to rash action.

You can do the same thing for your other bad habits, whatever they are. Identify them, track them, and eliminate them. Remember that markets change constantly. Sometimes they’re “user-friendly” and making money is like owning a printing press. But at other times, nothing works and you’re sorely tempted to break the rules.

It’s during these troubling times that you must exercise discipline. Remember these famous stock trading words, repeated here for the nth time:  Preserve your capital and wait for the right trading opportunity. Prevent undue losses and the profits will take care of themselves. And only discipline will make that possible.