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msg #62662
Ignore TheRumpledOne
5/15/2008 5:17:46 PM

Trading Psychology - Double Your Discipline in Three Simple Steps
Thursday, May 15th, 2008

Peruse any book on trading and you’ll find that discipline is an absolutely critical factor in profitable trading. This particular aspect of trading is also one of the biggest challenges for most traders, even sometimes for those that have been trading the markets for years.

What you’ll find here are three simple steps to double your discipline in very short order. Don’t dismiss this method. Even though it won’t solve every discipline problem you may run into, it will take you in the right direction and you really can double your discipline very quickly.

Step 1: Be aware while you’re in the moment. During the moment when you find yourself tempted to deviate from your trading plan, pose yourself this simple question: “Am I thinking about doing this out of emotion here or would this be in alignment with my better judgment?” Being aware of how you’re feeling - at the time - is what is critical, and then asking yourself the question. Often, the mistake happens because we simply are getting caught up in our emotions and the simple act of staying alert to the emotional surge will help to keep things in perspective. Awareness is only the first step though.

Step 2: Understand where the real problem is coming from. Usually the urge to deviate from your better judgment is coming from a fear. Here are a couple examples.

* Getting into or staying in a trade when you know that you shouldn’t often comes from the fear of missing out on an chance to profit. What is often erroneously attributed to greed is often a scarcity mindset coming into play. The fear of saying “No” demonstrates the fear that there “isn’t another bus coming soon”. When you don’t have the firm belief that there are numerous profitable opportunties to be capitalized on and that you have the know-how to take advantage of them, then the fear arises in the moment.

* Failing to pull the trigger is usually the fear of making a mistake more so than the fear of loss. Superficially it feels like the fear of loss, but the risk on any given trade is easily forseeable. This one is an issue of self-doubt due to past mistakes.

When reading the examples above, you may have noticed a common underlying factor. There is a way to counter fear, and the 3rd step is to address this specifically.

Step three: the most effective way to counter fear is through growing your confidence. Your daily life is full of risk and yet you can function will amidst this risk without any fear all. Why? Because you have the confidence to deal with it effectively. When you drive your car, go out in public, walk down a flight of stairs, you have no fear. You have developed the skills to do these things and do them well and without getting hurt. The potential for harm is there, but you have the confidence to handle these situations.

Trading is a relatively simple activity compared with other professions, particularly with the tools available in today’s world. It is certainly within your abilities, and as you educate yourself on and build your skills, you’ll find that your fears subside as your confidence grows. The challenge then becomes how to properly go about building your confidence - real confidence, not just courage.

True confidence comes from awareness, education, competence, practice, measurement of results and feedback for continuous improvement. Trading involves a significant body of knowledge and a respectable skill set to be developed to trade confidently. Unfortunately, many traders are not given the information when they start out to even know what they need to work on to become that successful trader that they envisioned at the start of their trading career.

Failing to stick to your system is but one of the many mistakes traders make that create losses and anguish. By knowing the root of the mistakes and having specific actions to take to avoid them, you are empowered to be a more consistent and profitable trader. There are numerous trading mistakes listed in the book, “The Subtle Trap of Trading” along with particular actions you can take to keep from making them. When you see where mistakes originate, you will find that your trading is both more profitable and lower in stress.

Discover the confidence-building and psychology of trading resources for traders at

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