Why DISCIPLINE is Crucial for Day Trading Forex Markets

Hey there traders, I have a question about trading discipline to ask you.

I want you to answer with full integrity and honesty because this question isn’t for me, but for you and your trading performance.

You can also tell me your answer in the comments box below so that you can make a public declaration before you decide what to do next to move toward trading success.

Okay, so here’s the question. Can you say, with confidence, “I trade with discipline?” Yes or no?

Perhaps you do trade with discipline 60% of the time. But maybe that 40% of impulsivity or mistake-making keeps you in a loss week after week.

If you do decide to comment your answer below, please also add why you think you do or do not trade with discipline. I’m really curious to hear your answers, and I’m sure other people are curious to hear your answers, too, because discipline is one of the most important traits you can develop to ensure success with trading.

And in today’s video, we’re going to explore why that is. We’re also going to talk about the difference between trading psychology and discipline, as well as explore some examples of what trading discipline looks like. Let’s dive in!

 

We traders, when we’re first starting out, we’re on a hunt for information.

We want to learn all the indicators, and candlestick patterns, and what economic reports we need to understand and follow so that maybe we can sit through one of Janet Yellen’s hearings and decipher even an iota of information that tells us which way the US economy is heading before the rest of the forex world moves.

Janet Yellen Forex Reports

If smartphones came out while you were growing up or you’ve never even experienced a world without smartphones, then you’re probably really adept at researching anything you need to know on the internet. Most information you need can be found freely.

However, there comes a point after which more information just leads to confusion and anxiety. It’s not uncommon for traders to endlessly search for new ways to tweak their strategies in order to utilize new information they found by researching another indicator or whathaveyou.

The thing is, after a few good months of diligently learning about technical analysis and day trading, you likely have all the information you need to start making money in the markets.

Now here’s the reason why I think discipline is the most crucial element to good trading. Once you have a decent strategy, that is, the appropriate information you need to know to use probability to your favor when trading, if you don’t have the discipline to follow its rules, you can’t use it.

Let me repeat: Information is useless unless you have the discipline to apply it.

You can have the greatest strategy developed by market wizards but it won’t make you anything if you can’t follow its rules. Therefore, honing discipline while trading is absolutely crucial.

Unfortunately, it’s not as easy as looking up a few good blog posts on trading psychology to develop your own discipline. It takes work, humility, the ability to reflect on your thoughts, your mistakes, your behaviors, and the ability to take action to change them. 

Trading Psychology vs. Trading Discipline

Now, you might not always hear the world discipline when learning about the mentality required to succeed in markets. You’re more likely to hear about trading psychology, which is also an important topic to explore as you learn, but it’s not the same thing as discipline.

Disciplined Trader taking a trade in Forex markets

Let’s talk about how these are different.

When learning about trading psychology, you’ll probably come across a good number of different psychologists, that is, therapists who hold a Ph.D. in psychology, who have become traders and talk about thought and emotional patterns. Some of the most notable authors on trading psychology include Alexander Elder and Brett Steenbarger. I highly recommend reading their books because they can give a lot of insight into the emotional turbulence most traders experience.

However, I think discipline is different from trading psychology because while trading psychology helps to explore thoughts, feelings, and behavioral patterns that come with trading, trading discipline focuses on what do you do in the face of those thoughts, feelings, and impulses to behave. The focus of this channel and my blog at Disciplined FX, for example, seek to help traders be able to observe those chaotic thoughts and feelings that arise while trading and be able to choose to follow their rules instead. We often do this by talking about market beliefs, trading paradigms, habits, and emotional and environmental tricks you can use to make discipline easier to perform over time. 

What Does Trading Discipline Look Like?

So let’s talk about a few different examples of trading discipline.

First, taking your stop loss, despite whatever chatter is running through your mind, is a form of discipline.

(If you find yourself struggling to take a stop loss, I talk about this in more detail in my book the 7 Habits of Successful Day Traders. Want a free excerpt from the book? Download a PDF here!)

Another example of trading discipline is following one strategy that you’ve backtested over a few months and being able to hold through a string of losses because you know that strategy works in the long run.

Just because you have discipline doesn’t mean the fears or sometimes greed that arises when we trade will ever completely go away.

The point of discipline isn’t to compartmentalize or try to push those feelings away, but instead be able to say, “I see you fear, I see you greed, and I’m going to follow my rules anyway.”

If you want a way to practice discipline outside of trading, and this is something I ask all of my mentees to do when they work with me, I advise you to commit to daily meditation practice.

If you want to know how to apply this to your day trading, check out this meditation tutorial I created to help you get started.

So now that you have a better understanding of why discipline is so important to becoming a successful day trader, I hope you can begin to spend more time becoming aware of the ways in which you commit to your trading discipline each day.

 I wish you the best of strength and luck, and I’ll see you out there in the markets!