The Oxford English Dictionary defines discipline as the practise of training people to obey rules or a code of behaviour. Trading successfully is all about obeying rules (following a trading plan), and the reason most struggling traders fail to make consistent profits is because they lack the discipline that the occupation requires.
What trader hasn’t got out of a profitable trade too early because they thought “It’s not going any higher”, or has failed to take a small loss and let it turn into a much larger one because they thought “It might come back”? We’ve all done it. Having a solid trading system or strategy is one thing, but having the discipline to trade it and stick to it day in day out is what separates the winning trader from the losing one.
I’d like to share with you then, a simple but powerful method for improving your discipline by boosting your will power. Discipline is after all, nothing more than an application of will power.
To increase will power requires that it is regularly exercised. Just like any muscle in the body, the will becomes stronger the more you use it. How do you exercise your will? By starting with a small task that requires small amount of will power to accomplish, and working up from there.
The method is remarkably simple. First, pick a minor habit that you have. The habit can be anything at all, but start small. Don’t choose smoking yet. Instead, pick something almost inconsequential. Perhaps you always sit in the same seat on the bus or train, or always take lunch at a particular time.
Next, resolve to change that habit. Tell yourself that from now on you will sit in a different seat, or read a different newspaper. Set your alarm ten minutes earlier and resolve to get out of bed as soon as it rings. It doesn’t really matter what the change is, just that you make a change. Stick doggedly to this resolution. If the habit is minor enough, it should be easy but require some kind of mental effort to keep yourself on track.
When you believe you have successfully changed that habit, pick another one. This time, choose something more difficult. If you can pick a bad habit, so much the better. I’d define a bad habit as being one that you will benefit from by changing it. Once again, resolve to make that change.
This time round you will need to put in a bit more effort to stick to your resolution. At this point, make a mental link between the resolution you’re working on and your ability as a trader. Tell yourself every day that by conquering this bad habit you are becoming a stronger person, which in turn means a more disciplined and more profitable trader. Every time you find that you need to use will power to break your habit, remind yourself of this link between your will and your ability as a trader. If your desire to succeed at trading is strong enough, it will help you to overcome the bad habit, and this in turn will strengthen your will power.
Rinse And Repeat
Then it’s just a case of rinse and repeat. When you have successfully broken the habit (which would be when you find you no longer exhibit it and you do so with no noticeable effort), pick another one and work on that. Try and go for something a bit more difficult each time.
Building up your will power in gradual steps in this way is like building up muscle by lifting weights. You wouldn’t want to start by lifting something far too heavy, but you would want to lift something just outside your comfort zone. When that becomes easy, you would add on more weight. The same applies with the bad habits. Make them just a little bit more difficult every time. You will increase your will power with each new conquest, and discipline in trading will naturally follow.
By the way, if you run out of bad habits, congratulations, you are the perfect human being! Okay, I’m being sarcastic. Seriously though, if you cannot thing of anything, ask someone close to you and if they know you well enough to be honest with you, they will provide you with a longer list of bad habits than you’ll ever need or want to know about.
When I’ve introduced this idea to some of my students in the past, they have looked at me like I’m quite insane. Yet every student who has tried this properly (by which I mean they didn’t give up after a week) has seen huge benefits. Not only did they become much more disciplined as traders, they rapidly eradicated all sorts of damaging bad habits as a bonus.