The single, common characteristic that all successful traders have
Every day, we seem to hear the same stories from our friends who invest and trade. Over and over again, the same story.
The story always goes something like this.
“It seemed like the the perfect time to buy, and so I bought! The next day, I woke up and saw that the stock fell in price. I held on to the stock for a few more days. I thought that, surely, the stock must go up. Alas, the stock kept falling. One fine day, I cut my losses and exited the position at a loss.
Since then, I stopped trading.”
And that is exactly why so many people start trading optimistically, but within a few months, stop trading completely.
How can it be possible that certain traders make money day after day, month after month, year after year; and others struggle to be profitable during any given month?
As with most problems in life, the answer is surprisingly simple, and it ultimately comes down to one, all important word: discipline.
Discipline: What we think it is Versus what it REALLY is
Most think of discipline as something that we should be doing regularly. Going to the gym regularly. Eating healthy foods regularly. Spending time doing something positive, regularly.
But if you notice- all three of these things are missing something critical. While they all talk about doing something positive and regularly, there is no concrete, plan of action. And without a plan of action, consistency cannot happen.
In a nutshell, discipline is all about doing one thing, consistently, over and over again with the exact plan of action outlined in advance.
How do you build a plan of action with trading? It’s simple.
- Figure out exactly what you intend to trade, in advance. Securities? Currencies? Commodities?
- Figure out exactly, in advance, how much time you plan on spending. Often times, we get our best work done when we spend less time. You might have noticed that you are able to think most clearly when you have a short, but specific amount of time to get something concrete done. The same applies to trading.
- Figure out exactly how much capital you are willing to put up on each trade, in advance. (this is more about risk management, but the concepts of risk management come from the core idea of discipline combined with consistency).
- Have a concrete trading strategy implemented, in advance. This includes all details of when to enter a trade, exit a trade, order types, etc. Another way to look at this is that there should be almost zero guesswork when it comes time to placing the trade. .
- Ensure you have the optimal, best trading environment in advance.
With all of this place, you are set. Now, you have a plan of action. Congratulations- you have done something that the vast majority of traders do not do.
With a plan of action, the next part is execution. You need to do same thing, every day, day after day. And that is what consistency is all about.
Read this post a couple times before you begin trading today. Are you truly ready? Do you have a proper plan of action outlined? Have you eliminated every sort of distraction that could prevent you from thinking clearly?
If the answers to the questions are a resounding YES, then you are finally ready. You have a plan of action and you are ready to execute.
And when you execute this plan of action consistently, day after day, never taking a day off…
that is when you have finally mastered discipline.
After all- as the famous saying goes, “Rome wasn’t built in one day.”