Forex Mistake #15 – Lack of Discipline!

Why Lack of Discipline could get you Broke?

First, check out this Vid – You Rack Disciprine!

There are so many things that can get a trader broke that I lost count. I know that’s not a very positive way of opening this article, but hey, we are talking about trader’s mistakes and I want you to be very aware of what Not to do and to realize that you can fall in a “trap” at any time. There’s one other thing that you need to understand right from the start – it took me a while: you are your worst enemy in trading… or at least you can become one if you lack discipline. Learn from my mistakes, not from your own.

 

How you can go Broke if you’re not Trading Forex with Discipline?

During my whole trading “career” I’ve spent thousands of hours learning, mixing indicators, combining systems and looking for a solid, reliable way of trading, but when I’ve finally found it, I was already so hooked on searching for it that I couldn’t stop looking and just trade. I lacked the discipline needed to follow a system because somewhere along the way, looking for a system became more important than using it. And here’s a fine example of what I mean: I was trading a nice intraday strategy with decent accuracy and more than 1:1 risk to reward (winners are bigger than losers) but one of the base rules was to stop trading before news or during the Asian session. Eh, but rules are made to be broken, right? Wrong! Rules are there because there’s a reason to. After all, I made those rules, it’s not like someone shoved them down my throat. My rules, my money, my risk… and I knew for a fact that not following them will have a negative impact on my pocket but my Slippery Finger Syndrome always made me push that button sooner than my system required me to… or later… or during news… or during the Asian session. The strategy went down the drain and so did my account, but every evening I would check how many pips I would have made if I had followed my strategy and the result was no surprise: I would have finished about 85% of the trading days in profit. I say “no surprise” because I had tested the strategy and the results were similar. But there was a big difference: in back-testing I could keep calm and obey the rules, while in live trading I just couldn’t stick to my plan because emotions got in the way and I lacked the discipline to block them. Also, I kept adding indicators and modifying the rules because I was under impression that I’m missing trades and I don’t trade enough… again, lack of discipline to follow my tested plan.

 

They say the trader is more important than the strategy and after all the time when I lacked discipline, I finally understood what they mean: you can have the best strategy in the world but if you can’t follow it, you’ll end up losing money. Fortunately for me, I realized I was being an idiot before I went broke and I started working hard on my discipline. I had the trading strategy, now all I needed was a clear head and the willingness to stop trading like a monkey. Here are some tips on how to do that:

  • Build confidence in your strategy. Back-test it, forward-test it, trade it with very small amounts until you know it is profitable. Having confidence in your system will make it easier to follow.
  • Isolate the problem you are having and work towards fixing it. If for example you open trades at news time, with no connection to your system, just because you see price moving strongly in one direction, shut down your computer half an hour before news and open it half an hour after news.
  • If you can’t obey the rules of your system, find a way to “punish” yourself – don’t take it to extremes though – for instance, if you planned on drinking a beer in the evening, but during the day you lacked discipline, you will deny yourself that beer… of course this requires more discipline to prevent you from drinking that beer. Anyway, this might work or not, depending on what type of individual you are.
  • Keep a journal of all your trades and mark in Red all trades that weren’t taken according to the system, no matter if they were winners or losers. This way you will notice if you improve your discipline by checking the frequency of the Monkey-trades or whatever you want to call those trades that don’t fit the system.
  • Find a strategy that fits you because if it doesn’t, you will find all kind of reasons not to follow it during trading: you will think “Ah, here’s a good short, I’m gonna go in” before all the rules agree because… the indicators lag behind price or because you have a “gut feeling” price is gonna drop.
  • At the end of each day, count how many pips you would have made if you would have followed the system. This will allow you to see the benefits of being disciplined (assuming your system is profitable if followed correctly).

 

 

Bottom Line – Plan the Trade and Trade the Plan

Once you have settled on a plan of “attack”, do your best to follow it because if you don’t, it just means that you wasted the hundreds of hours that you put into creating and testing your system. Also, try to find your so called comfort zone: if you are a trend following trader, it will be very difficult for you to trade a counter trend strategy; if you like the 15 minute chart, you will most likely rush trades if you try to trade on the Daily charts. Find what suits you and take my word that discipline is a major part of your success as a trader… or don’t take my word for it and see for yourselves.

 

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