How to Attain the Character and Discipline Needed to for Successful Trading
What you can do or dream you can do, begin it. Boldness has genius, power, and magic in it. -Johann Wolfgang Goethe
There is a huge wealth of material available in bookstores and through seminars about how people can maximize there ability to succeed in life. These range from the old classics such as Think and Grow Rich by Napoleon Hill to new insights from Anthony Robbins in his book Awaken the Giant Within. I consider the dedicated study of these ideas to be essential for traders, because unlike other professions, there is no system of accountability in which someone (like a boss or supervisor) is telling you what to do or not to do. Even if you run your own company, you still have to answer to the needs of your customers. In trading, you alone are responsible for your decisions every moment of every trading day. You will only reap the rewards of these decisions if you can be brutally honest about your mistakes and take whatever steps are necessary to correct them. Further, maintaining discipline is a never-ending battle because your mind will always try to fool you into judging your performance in a favorable light.
After studying the ideas of experts in the self-improvement field and combining that with what I've learned through my own experiences, I have arrived at my own strategy for developing and maintaining trading discipline. I will share this strategy in the following pages. While I realize that different individuals have different temperaments and hang-ups, I've talked to enough traders to know that there is a lot of commonality between the techniques I use for myself and those in use by other traders I'd consider to be successful. So, if you think you have a good trading strategy, but are still searching for tactics which will strengthen your discipline to carry it out, I hope you'll receive some benefit from what I have to say.
Keep a Journal
Recently, when Larry Connors interviewed me in a live forum on TradingMarkets.com, I pointed out the importance of maintaining a trading journal and doing so religiously. In fact, I'd go as far as to say you should be something of a fanatic about it.
Most novice traders have heard something about the importance keeping a trading journal and they see this as a text-only diary in which they record the rationale they had for entering a trade and their emotional state at the time. Actually, that approach only scratches the surface of the more hard-core approach that I put to use in my trading.
When I tell you to keep a "journal" I mean that for every single trade that you get into:
- Print out a chart of the market you traded.
- Draw arrows pointing to entry point and protective stop.
- Write onto the chart or on a separate piece of paper, all the reasons you had for making the trade, as well as any other information that you feel is relevant.
- Draw lines and arrows as necessary in order to describe visually any technical patterns and Runaway Characteristics that describe your trading setup.
- Every time you move your protective stop, print out another chart with the updated price action and add your new protective stop.
- When you exit the trade, print out another chart and draw an arrow pointing to your exit point.
- In full detail, add any other notes you may feel are pertinent.
In essence, you are creating for yourself, a "how to" book that you can refer back to in the future--but you are refining what "how to" means as you progress in your trading. Depending on what your trading time frame is, refer back to your past trades and learn from your mistakes by adjusting your strategy as necessary in order do better next time.
As you can see, the trading journal I create for every trade is detailed and in my opinion vastly better than the little namby-pamby diary that I've heard that many traders keep. Remember that the purpose of a religious journal is not to merely gush out your mental state or your innermost thoughts, but rather to create a ladder for you to steadily climb upwards to the ultimate goal of trading success. Each time you trade you'll be adding to your knowledgebase of dos and don'ts which become the rungs of the ladder you climb.
Outline of My Daily Action Plan
As I inferred earlier, maintaining one's trading discipline is a battle that you must fight constantly because everyday little situations crop up which tempt you to do the wrong thing. In order to keep yourself on that narrow path to consistent trading profits, you must have a daily strategy which helps you to stay focused on the goals you've set and keep doing the things that will get you there.
Below I've outlined my Daily Action Plan for Successful Trading. Even if you've read about some of these ideas before, I encourage you to click on each link anyway because everything I described is framed in the context of trading--after all, you are not training to be an astronaut or
salesman. There are particular insights I want to share with you that may help you as you explore each one of these Action Plan components.
A Word About the Mental Trading Account
I want to especially highlight my excitement about a strategy that I consider essential to maintaining my trading discipline. It's called the Mental Trading Account. It is modeled after the Mental Bank Course, which has helped thousands of people to successfully execute the steps they needed in order to achieve their goals. I truly believe that this one tool, along with the kinds of strategies I've already outlined in the course, will revolutionize the way you trade and the way you live in general.
Daily Action Plan for Successful Trading.
1. Statement of Purpose
2. Sensory Goal Statement
3. Photographs and Pictures of Achievement
4. List of 10 rewards for achieving your goal and vision
5. Daily visualization of achievement of goal with rich sensory images
6. Evening Review of the Day in Light of Your Goal
7. Evening visualization of the achievement of your goal
8. Recording Entries Into Your Mental Trading Account
