In this week’s article, we are focusing on how to maintain discipline in trading and life. It may seem a bit premature to begin talking about the holiday season and the end of another year, but before you know it they will be upon us. With that in mind, it’s time to reflect on what has transpired both in our trading and personal endeavors over this year. As we do our review we must ask ourselves what changes can be made to continue to improve all facets of our personal and professional lives.
During the upcoming time of reflection and festivity temptation is abundant as baked goods and rich foods take center stage. For those who lack self-control when it comes to consuming these delicious holiday foods, these temptations or overindulgence usually lead to weight gain. This in turn precipitates a resolution to shed those unwanted pounds at the start of the New Year. It’s almost as if the extra weight was the motivation, or excuse needed to start a new workout regiment. Unfortunately, statistics show that for those that end up losing the weight, less than 2% will be able to keep it off for any significant length of time.
Corroborating the holiday binge cycle, health club attendance markedly increases during the first week in January as evidenced by the extended wait time to get on a treadmill during this time. This changes a few weeks later though as the crowds dissipate. This is because the majority of health club attendees discovered it’s too much work to drive to the place, let alone stick to a fitness routine. The ones that do remain (which are few) are those who have truly made the commitment to achieve their goals.
Similar to the first-time fitness club attendees early in the year, new traders start out with the same vim and vigor – lofty goal in place –ready to take on the challenge of financial risk taking. However, after a few months something happens. Their commitment starts to waver as the realities of trading become apparent: following rules, accepting losses, having patience and all the rest become much more challenging than was initially expected. This is when traders begin looking for “other ways;” methods that aren’t as tough. Ultimately though, they find out there are no easy ways to make money consistently (legally anyway).
So the question is: Why is it so difficult for most people to stick to a plan. A whole host of factors can be ascribed to this breakdown. I believe, however, that certain personality traits can account significantly for this lack of follow-through.
If you’re a trader having issues with discipline, ask yourself the following questions: Do you find yourself always arriving late to appointments? Do you have trouble finishing what you start? Is your office space organized or always in a state of disarray? Do you take an inordinate amount of time making decisions? Lastly, are you a commitment-phobic? (And I’m not just referring to your dating life). If you answered “yes” to some (or all) of these questions, don’t worry; all is not lost. You just have some work to do. The good thing is you’ve identified some of the changes you can look forward to making; that is if you want different results than what you’re currently experiencing.
As the title of the piece suggests, discipline in trading and life are one in the same. Being disciplined is eating right (quantity and type of food), how we comport ourselves, and how we go about pursuing our goals. It’s making a commitment to achieving what we set out to accomplish without compromises or excuses. Why would we believe that if we lack discipline in our day-to-day lives that we would suddenly become disciplined in our trading? That’s just deluded thinking.
As we know from our own personal trading experiences, holding back and having the patience to wait for the right setup can sometimes be tough; but having the self-control to do this may make the difference between profits or losses. All traders must continuously do a self-audit. To this end, we should work on changing those unwanted aspects of our personality by planning and setting goals for ourselves.
I always find inspiration in those who, despite all odds persevere and accomplish great feats. This attribute of dogged determination is something I’ve always admired in people and have tried to emulate throughout my life. It’s not always easy since sometimes we can get too comfortable in our current situation. When that happens, I believe it’s necessary to get out of our comfort zone. Being uncomfortable can be good, as it will allow us to grow and regain that thirst for challenge. That’s partly why I love trading.
With a new year fast approaching my hope is that this gives you some food for thought so that all your goals can be fulfilled. I know most of you would much rather read about chart setups and the like, but the reality is that without discipline all the market knowledge in the world will not help you become consistently profitable. So as a trader you must both maintain discipline in trading and life to have a chance of succeeding in trading.
Written by Gabe Velazquez, Online Trading Academy Instructor. Gabe got his start in the markets as a broker trainee for Paine Webber, a mere 3 months before the market crash of 1987. He witnessed the gut wrenching fear of investors during that time period and the wild speculative euphoria of the late 90’s. That experience brought to light the importance risk management plays in trading and investing. In fact, it’s greatly influenced the way he trades today. He spent 15 years as a stock and commodities broker, conducting technical analysis seminars through-out Southern California. After many years of managing other people’s money, Gabe now concentrates full time on trading his own portfolio and teaching. Students will benefit from his first hand experience of daily involvement in the market. He brings with him an acute awareness and understanding of how the markets really work. Articulating this knowledge clearly, succinctly, and with enthusiasm is something students can appreciate. This gift for communicating was honed through many years of public speaking. He currently holds a series 7, 63, 9 and 10 (securities and options principals license.)