TRADING DISCIPLINE-- What to do right now to make yourself a stronger person and a better trader
1. Develop Consistency - You can create a mindset of consistency by developing beliefs which support you in obtaining this result. In order to develop consistency, there are a number of things which you must do, including identifying your edges, defining the risk in each trade in advance, and accepting the risk to be able to exit a position when a defined loss level is realized. These and key mindsets help traders work through the issues they face in taking a trade, making the trade and executing their exit from the trade
2. Trading is a Probability Game - You can't be a perfectionist and expect to be a great trader. Your losses (that you hope will return to breakeven) will kill you
3. Jumping In Too Soon or Getting In Too Late - These mistakes come from traders not having a well-defined plan of how they will enter the market. This positions the trader as a reactive trader instead of a proactive trader, which increase the level of emotion the trader will feel in reacting to market movements. A written plan helps make a trader more systematic and objective, and reduces the risk that emotions will cause the trader to deviate from his plan.
4. Not taking profits on winners and Letting winners turn to losers - Again this is a function of not having a properly thought-out plan. Entries are easy but exits are hard. You must have a plan for how you will exit the market, both on your winners and your losers. Then your job as a trader becomes to execute your plan precisely.
5. Great traders don't place their own expectations on to the market's behavior ,whereas poor traders expect the market to give them something. The market does not know who you are and owes you nothing. Period. When conditions change, a smart trader will recognize that, and take what the market gives.
6. Emotional pain comes from expectations not being realized - When you expect something, and it doesn't deliver as expected, what occurs? Disappointment. By not having expectations of the market, you are not setting yourself up for this inner turmoil. The market doesn't generate pain or pleasure inherently; the market only generates upticks and downticks. It is how you perceive and respond to these upticks and downticks that determines how you feel. This perception and feeling is a function of your beliefs. If you're still feeling pain when taking a loss according to your plan, you are still experiencing a belief that your loss is somehow a negative reflection on you personally.
7. The Four Major Fears - Fear of Losing Money, Being Wrong, Missing Out, Leaving Money on the Table. All of these fears result from thinking you know what will happen next. Your trading plan must approach trading as a probabilities game, where you know in advance you will win some and lose some, but that the odds will be in your favor over time. If you approach trading thinking that you can't take a loss, then take three losses in a row (which is to be expected in most trading methods), you will be emotionally devastated and will give up on your plan.
Recommended reading: Mark Douglas, The Disciplined Trader and Trading in the Zone
Janice Dorn, MD, PhD
Neuropsychological Trading Coach
Dr. Janice Dorn is a graduate of the Albert Einstein College of Medicine, where she received her Ph.D. in Neuroanatomy. She did her postdoctoral work in Neurophysiology at the New York Medical College. She received her M.D. from La Universidad Autonoma de Ciudad Juarez, did one year of clinical clerkships in Phoenix, Arizona. and then completed a Neurology Internship at The University of New Mexico in Albuquerque.
She trained in Anesthesiology at UCLA, where she also did a Fellowship in Cancer Pain Management. She completed a Psychiatric Residency at the Maricopa Medical Center in Phoenix. She has been a faculty member to the rank of Associate Professor at the University of Texas Southwestern Medical Center in Dallas, The University of Missouri Medical Center at Columbia and the Chicago Medical School, where she won numerous awards for outstanding teaching. She also held the position of Director, International Clinical Research for a major pharmaceutical company, in which capacity she traveled internationally for nine years, and has visited almost every country in the world, including living in Scotland, Germany and South Africa. Dr. Dorn began a private boutique practice of Biological Psychiatry, Addiction Psychiatry and Psychoneuroendocrinolgy in Phoenix in 1987.
Dr. Dorn holds the following Board Certifications:
Diplomate, General Psychiatry, American Board of Psychiatry and Neurology
Diplomate, Addiction Psychiatry, American Board of Psychiatry and Neurology
Diplomate, American Society of Addiction Medicine
For the past twelve years, Dr. Dorn has focused her attention on trading, mentoring and commentary in the financial markets, with emphasis on Behavioral NeuroFinance, Mass Psychology and Trading Neuropsychology. A graduate of Coach University, she is an active trader, trading coach, and the author of 300 publications, relating to trading and investing neuropsychology, market mass psychology, psychoneuroeconomics, behavioral neurofinance and holistic wellness. Dr. Dorn is a sought-after media personality, lecturer and trading mentor who has provided real-time, web-based personal coaching for more than 600 traders and investors.