I like share this article from Lance Beggs.
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How Can I Get More Discipline?
Here is an excerpt from an email I recently received:
EMAIL (Excerpt):
... one of my biggest hurdles is still discipline. I'm beginning to think I might need some help in this area. Do you know of anyone who has successfully helped people with their discipline?
RESPONSE:
Poor discipline is usually perceived as a psych issue, but that's not always the case. More often than not it's the result of other factors which produce poor discipline. Let's look at a few possible causes.
Lack of a valid positive expectancy strategy!
An invalid strategy leads to inconsistent and variable results with a declining, stagnating or wildly fluctuating equity curve. This results in frustration and lack of trust in the strategy. The end result of frustration and a lack of trust is an inconsistent application of the plan, making results even worse. Poor results are blamed on our inconsistent application, as numerous cognitive bias' allow us to see all the winning trades we should have caught, and allow us to rationalise why we should have avoided all the losers, if only we were more disciplined. We seek answers in the trading psychology texts to find means for greater focus and increased discipline.
In this case we have failed to see the correct problem. That is, we do not have a valid approach to trading the markets.
Are you sure your strategy is valid and provides an edge? How?
Lack of belief in your strategy!
Assuming you do have a positive expectancy strategy, have you really proven it to yourself? Have you conducted sufficient back-testing and forward-testing to have absolute belief in the fact that this strategy works? Often poor discipline is the end result of lack of trust. And trust can ONLY be gained through experiencing success. Experience success in a simulated environment first, ensuring actions are made as realistic as possible.
Many people claim that you should avoid a simulated environment as it does not realistically offer many of the psychological challenges associated with having money at risk. This is missing the point. Why risk real money in a live trading environment if you can't even trade the strategy in a simulated environment, where you don't face those additional challenges. Prove to yourself first that you can do this in the easier simulated environment. Only then add the additional challenges.
So, do you really believe in your strategy? Have you experienced success with it? Or do you need some more time to actually prove to yourself that the strategy does manage risk and opportunity sufficiently well to not hurt you in the markets.
There are some elements of psychology here, but the issue is not one of poor discipline. Rather poor discipline is a result of lack of belief. And belief needs to be gained through further testing.
Incorrect "niche"
Even when a trader has a valid and proven strategy, poor discipline may be a symptom of a strategy which does not provide a good fit for our personality and lifestyle.
More intense, control-freak personalities (such as mine), should not be trying to hold positions for days or weeks. Those who require more thought out and reasoned decisions should not be scalping sub-one-minute charts. Those with full-time jobs should not be trading strategies that require screen-watching for eight hours a day.
Find a match for your personality and lifestyle, as discussed in this previous article: http://www.yourtradingcoach.com/Arti...Into-Life.html
Inability to adapt execution to changing market conditions!
Even when a trader has a valid and proven strategy, belief in that strategy, and a good "fit" for their personality and lifestyle, poor discipline may again be a result of poor trade entry and management decisions as a result of failure to recognise or adapt to changes in the underlying environment.
Market sentiment will change over time. Volatility will change over time. Speed of tape will change over time. Liquidity will change over time.
Different environments require a different approach. Some are best managed through limit order entries. Others require a stop (or market) entry otherwise you risk being left behind. Some environments require tighter stops. Others require wider stops in order to avoid premature stop-outs from choppy market conditions. Some environments require aggressive price targets. Others warrant more patience and the ability to extend targets and/or trail a stop.
It is quite likely that some environments are best avoided for any particular strategy. It may also be quite likely that some environments are unsuited to your risk tolerance, and again best avoided.
Inability to adapt to changing conditions will mean less than optimal decisions leading to under-performance (compared with expected results, historical results and potential available in the market) leading to frustration leading to inconsistent application of the plan (poor discipline) and further degradation of results. The most visible aspect is our inconsistent application, so once again "discipline" becomes the target for our blame; when really our poor discipline is an effect caused by other underlying issues.
The more appropriate place for blame is your inability to recognise and adapt to changes in the market environment. And this is better addressed via study and experience. Our focus should be on targeted deliberate practice in recognition of environment and appropriate decision making for that particular combination of environment, strategy and risk tolerance.
Inappropriate management of risk!
We must at all times be trading within our risk tolerance. Increasing risk above our current degree of risk tolerance leads to increased emotional swings through excessive highs and lows. This in turn then leads to emotion influencing our decision making, leading to inconsistent application of the plan, and greater variability of results. Once again what appears to be poor discipline, is not a psych issue, but rather a result of inappropriate risk.
So set appropriate position sizes and appropriately wide stops. The money at risk should NOT worry you at all in the event of a trade loss.
In addition, a massive blowout creates emotional pain. Factors associated with this blowout trade may become associated with emotional pain; leading to a triggering of this pain in future trades when the same factors are in play. The classic here being the inability to pull the trigger on a valid trade due to fear established in past trades which produced a massive loss and emotional pain.
So manage risk to manage state. Aim for smaller swings in equity curve rather than wild up and down movement.
Before you even look to performance psychology to improve your consistency, ensure you have these basic trading and strategy fundamentals in place.
Only then can we talk more about enhancing your performance.
Unfortunately, having the above trading and strategy fundamentals in place does not guarantee success if one is then ill-disciplined and is regularly finding themselves failing to consistently carry out their plan.
Accepting a rushed or incomplete pre-session routine.
Passing on our post-session review and learning processes.
Failure to follow our basic plan during the session, whether through intentional violation (always justified of course) or sloppy / inattentive error (in all areas of decision making -- entry, stop or target movement, position sizing, session risk limits, scaling in/out etc).
This is what we usually see as poor discipline - inconsistent application of our plan. And so our ill-disciplined trader embarks on a search for a solution. They seek tools, techniques and strategies to "get more discipline".
Again though, our trader's focus is off-target. There is no way to "get more discipline". Rather we need to work on:
Building appropriate habitual behaviour.
Establishing routines and strategies for maintenance of an appropriate state for optimal performance
Habits and state management!
They are our goals.
With habits in place for completion of your pre and post-session routines and for adhering to your rules and behaviour during session, plus appropriate state management in order to limit the ability of inappropriate emotional response to trading results to negatively impact upon our decision making, the end result will be what we call "disciplined trading".
Discipline is best seen as an outcome.
You don't get more discipline.
You develop better habits and better emotional state management... and the outcome will be better discipline.
Next week we'll continue this article, exploring habits and state management.
Happy trading,
Lance Beggs
------------
How Can I Get More Discipline?
Here is an excerpt from an email I recently received:
EMAIL (Excerpt):
... one of my biggest hurdles is still discipline. I'm beginning to think I might need some help in this area. Do you know of anyone who has successfully helped people with their discipline?
RESPONSE:
Poor discipline is usually perceived as a psych issue, but that's not always the case. More often than not it's the result of other factors which produce poor discipline. Let's look at a few possible causes.
Lack of a valid positive expectancy strategy!
An invalid strategy leads to inconsistent and variable results with a declining, stagnating or wildly fluctuating equity curve. This results in frustration and lack of trust in the strategy. The end result of frustration and a lack of trust is an inconsistent application of the plan, making results even worse. Poor results are blamed on our inconsistent application, as numerous cognitive bias' allow us to see all the winning trades we should have caught, and allow us to rationalise why we should have avoided all the losers, if only we were more disciplined. We seek answers in the trading psychology texts to find means for greater focus and increased discipline.
In this case we have failed to see the correct problem. That is, we do not have a valid approach to trading the markets.
Are you sure your strategy is valid and provides an edge? How?
Lack of belief in your strategy!
Assuming you do have a positive expectancy strategy, have you really proven it to yourself? Have you conducted sufficient back-testing and forward-testing to have absolute belief in the fact that this strategy works? Often poor discipline is the end result of lack of trust. And trust can ONLY be gained through experiencing success. Experience success in a simulated environment first, ensuring actions are made as realistic as possible.
Many people claim that you should avoid a simulated environment as it does not realistically offer many of the psychological challenges associated with having money at risk. This is missing the point. Why risk real money in a live trading environment if you can't even trade the strategy in a simulated environment, where you don't face those additional challenges. Prove to yourself first that you can do this in the easier simulated environment. Only then add the additional challenges.
So, do you really believe in your strategy? Have you experienced success with it? Or do you need some more time to actually prove to yourself that the strategy does manage risk and opportunity sufficiently well to not hurt you in the markets.
There are some elements of psychology here, but the issue is not one of poor discipline. Rather poor discipline is a result of lack of belief. And belief needs to be gained through further testing.
Incorrect "niche"
Even when a trader has a valid and proven strategy, poor discipline may be a symptom of a strategy which does not provide a good fit for our personality and lifestyle.
More intense, control-freak personalities (such as mine), should not be trying to hold positions for days or weeks. Those who require more thought out and reasoned decisions should not be scalping sub-one-minute charts. Those with full-time jobs should not be trading strategies that require screen-watching for eight hours a day.
Find a match for your personality and lifestyle, as discussed in this previous article: http://www.yourtradingcoach.com/Arti...Into-Life.html
Inability to adapt execution to changing market conditions!
Even when a trader has a valid and proven strategy, belief in that strategy, and a good "fit" for their personality and lifestyle, poor discipline may again be a result of poor trade entry and management decisions as a result of failure to recognise or adapt to changes in the underlying environment.
Market sentiment will change over time. Volatility will change over time. Speed of tape will change over time. Liquidity will change over time.
Different environments require a different approach. Some are best managed through limit order entries. Others require a stop (or market) entry otherwise you risk being left behind. Some environments require tighter stops. Others require wider stops in order to avoid premature stop-outs from choppy market conditions. Some environments require aggressive price targets. Others warrant more patience and the ability to extend targets and/or trail a stop.
It is quite likely that some environments are best avoided for any particular strategy. It may also be quite likely that some environments are unsuited to your risk tolerance, and again best avoided.
Inability to adapt to changing conditions will mean less than optimal decisions leading to under-performance (compared with expected results, historical results and potential available in the market) leading to frustration leading to inconsistent application of the plan (poor discipline) and further degradation of results. The most visible aspect is our inconsistent application, so once again "discipline" becomes the target for our blame; when really our poor discipline is an effect caused by other underlying issues.
The more appropriate place for blame is your inability to recognise and adapt to changes in the market environment. And this is better addressed via study and experience. Our focus should be on targeted deliberate practice in recognition of environment and appropriate decision making for that particular combination of environment, strategy and risk tolerance.
Inappropriate management of risk!
We must at all times be trading within our risk tolerance. Increasing risk above our current degree of risk tolerance leads to increased emotional swings through excessive highs and lows. This in turn then leads to emotion influencing our decision making, leading to inconsistent application of the plan, and greater variability of results. Once again what appears to be poor discipline, is not a psych issue, but rather a result of inappropriate risk.
So set appropriate position sizes and appropriately wide stops. The money at risk should NOT worry you at all in the event of a trade loss.
In addition, a massive blowout creates emotional pain. Factors associated with this blowout trade may become associated with emotional pain; leading to a triggering of this pain in future trades when the same factors are in play. The classic here being the inability to pull the trigger on a valid trade due to fear established in past trades which produced a massive loss and emotional pain.
So manage risk to manage state. Aim for smaller swings in equity curve rather than wild up and down movement.
Before you even look to performance psychology to improve your consistency, ensure you have these basic trading and strategy fundamentals in place.
Only then can we talk more about enhancing your performance.
Unfortunately, having the above trading and strategy fundamentals in place does not guarantee success if one is then ill-disciplined and is regularly finding themselves failing to consistently carry out their plan.
Accepting a rushed or incomplete pre-session routine.
Passing on our post-session review and learning processes.
Failure to follow our basic plan during the session, whether through intentional violation (always justified of course) or sloppy / inattentive error (in all areas of decision making -- entry, stop or target movement, position sizing, session risk limits, scaling in/out etc).
This is what we usually see as poor discipline - inconsistent application of our plan. And so our ill-disciplined trader embarks on a search for a solution. They seek tools, techniques and strategies to "get more discipline".
Again though, our trader's focus is off-target. There is no way to "get more discipline". Rather we need to work on:
Building appropriate habitual behaviour.
Establishing routines and strategies for maintenance of an appropriate state for optimal performance
Habits and state management!
They are our goals.
With habits in place for completion of your pre and post-session routines and for adhering to your rules and behaviour during session, plus appropriate state management in order to limit the ability of inappropriate emotional response to trading results to negatively impact upon our decision making, the end result will be what we call "disciplined trading".
Discipline is best seen as an outcome.
You don't get more discipline.
You develop better habits and better emotional state management... and the outcome will be better discipline.
Next week we'll continue this article, exploring habits and state management.
Happy trading,
Lance Beggs
)
traderathome
