Becoming a successful trader requires more than just knowledge of the markets and technical analysis. It demands discipline and the ability to stick to a set of rules consistently. In this article, we will explore two crucial lessons that can help you develop the discipline needed to become a more successful and profitable trader.
Establishing a System and Following Rules
One of the fundamental aspects of becoming a disciplined trader is having a well-defined system and following a set of rules. Just like a roadmap guides a traveler, a trading system provides a framework for making informed decisions. It helps you identify the types of stocks to trade and sets guidelines for entry and exit points.
Rule 1: Walk away if I give back 50% of my profit AFTER crossing my daily goal of $5,000
Rule 2: Once I walk away, stop watching the market at all to prevent myself from falling victim to fomo and going back in for another trade.
I always want to emphasize the importance of having a system in place. By following a set of rules, you can avoid impulsive and emotional trading decisions. These rules should be based on thorough research, technical analysis, and risk management strategies. By adhering to your system, you can minimize the impact of emotions and increase your chances of consistent profitability. You may find different rules are more suitable for your style of trading.
For example, when I first published this episode a subscriber on YouTube said what if you’re up $7k, shouldn’t you walk away when you’re up only $5k (daily goal) instead of going back down 50% to $3,500. I think that is a valid point. Perhaps after crossing the daily goal, you should be especially careful about dropping back below it. But if for example, I were up $5,800, and lost $1k, I’d be up $4,800. I think that’s still a small enough setback on the day that if there are good opportunities, I’d be comfortable continuing to trade. Remember, the goal is to maximize the time you’re in the market and making money. You don’t want to knock yourself out of the game too soon. So in my opinion, if I only give back 15-25%, I want to keep trading. But once I’ve given back half, that’s my hard stop to walk away.
Learning from Mistakes and Staying Above Goals
Another crucial lesson in developing discipline as a trader is learning from your mistakes and staying above your goals. It’s natural to make errors in trading, but what sets successful traders apart is their ability to turn losses into valuable lessons.
Warrior Trading emphasizes the importance of self-reflection and analysis. By reviewing your trades and identifying where you went wrong, you can pinpoint areas for improvement. Recognizing moments where you could have intervened sooner or exercised more discipline can help you avoid repeating the same mistakes in the future.
Additionally, it is essential to set realistic goals and stick to them. Staying above your daily goals and not giving back profits can help you maintain discipline and prevent impulsive trading decisions driven by fear of missing out (FOMO).
It’s important to do everything possible to keep yourself at peak emotional performance.
Summary
Becoming a disciplined trader is a journey that requires commitment and self-awareness. By establishing a system, following a set of rules, and learning from mistakes, you can develop the discipline needed to navigate the markets successfully. Remember, discipline is not just about making money; it’s about making consistent and informed decisions. So, embrace these two essential lessons and watch your trading skills soar to new heights. Happy trading!