In terms of trading discipline, most traders especially beginners underestimate, how important it is in terms of achieving currency trading success and how hard it is to trade in a disciplined way. Before we look at discipline in trading, let's look at it in another area of life which is weight loss.
Discipline in Dieting Contrasted with Forex Trading
In terms of weight loss, all you need to do to lose weight is to consume less calories and combine it with exercise and you will lose weight – you follow a set plan and after a period of time, you get a result which is you weigh less. Well it sounds simple to do this but 90% of all people who start a diet fail to finish it and fail to lose weight. Most people lack discipline as an ingrained trait and in the diet industry there are a huge number of vendors selling the myth of losing weight with no effort.
Now you maybe thinking - I have followed a diet and lost weight so I should easily be able to follow my trading signals and make money but you would be wrong. The reason for this is unlike dieting there is no guaranteed end result which is positive. Following your trading strategy with discipline is not guaranteed to make you money although if your plan is soundly based, it probably will but the doubt of it doing so causes huge problems for traders in FX markets.
Discipline V Emotions in Trading
When traders come to the markets, they need to trade their trading signals with discipline but there is a major problem with this which is losses. As we have said there is no guarantee that even if you follow a trading system with discipline it will make money and when losses start the doubts set in and emotions come into play. When traders start to lose, they are tempted to override their trading signals in the market and the most common is to let a loss run.
A trader lets a loss run and hopes it turns around but it very rarely does and a small loss becomes a bigger loss and eventually, the trader is forced to take it as his equity becomes depleted. The hope of turning a loss into a profit tempted the trader to run the loss and the fear of being wrong. The problem in Forex trading is you need to accept your wrong on most of the trades you do and keep losses small. If you do this, you can ride the minority of winners you get to make an overall profit – single trades don't matter in trading currencies, in terms of your overall performance and neither does the the percentage of traders you win, it's the size of winners to losers over time which is important.
So when traders are wrong they want to hold onto their losers but they also lack discipline in another area which is holding profits for long enough to cover the trades they lose. While not as commonly discussed as running loses, cutting profits to soon is another major reason for traders losing in Forex markets.
If a trader has a profit the emotions of greed and fear come into play. As soon as an open profit is on his account, the trader gets greedy and wants to take it, in case it gets away or even worse turns into a losing trade. The trader sees ticks move against his trade and they may only be small but fear grips him and he thinks the profit will disappear - so he takes it in and banks it. Of course if you do this to often, your winners are never going to cover the losing trading signals you make and this will lead to an erosion of equity of equity and a wipe out of trading funds.
If you want to win at Forex trading, the key is to run winners to cover losers NOT run losing trades and cut winning ones which is obviously going to lead to an overall loss. This may sound common sense and it is but keep in mind money is on the line and emotions over ride common sense in terms of most traders.
Discipline and Society
Discipline is seen as a good trait in society ie working towards a goal but in Forex markets it exposes traders to problems which are created by society conditioning. This needs some more explanation so lets look at why:
If you trade with discipline, you have to take losses and feel stupid and losing and looking stupid is not seen, as a good trait by the majority.
You have to stand alone from the crowd and the reason for this is obvious – 90% of all traders lose money trading the markets but we are conditioned by society, to conform and many people simply cannot take not conforming.
Another problem in terms of trading discipline is you have to survive in a market which has no rules and of course we are used to living by rules in our lives – society is rigid and law based – forex trading is the jungle where only the fittest survive. It's anarchy in markets and you have to live by your own rules or you will perish. The thought of having to survive the markets on their own is to much for most traders and they seek help – they look for gurus, scraps of news to support their view or delegate their trading strategy to someone else and then lose.
So Can I trade With Discipline and Win? – Yes But
You need to see currency markets for what they are and be aware of all the problems we have discussed above because if you try and impose your opinion or let your emotions control your trading – you will soon be another loser.
My biggest tip for trading with discipline is - read up on the great traders and see, what they have to say and it will convince you, that to be a successful Forex trader you need to suffer pain short term, look stupid and be a loner but your not hurting anyone in addition, no one needs to know about what your doing apart from you and you should never discuss your trading with anyone else and seek an opinion. If you understand this, you can focus on the longer term which is a big profit in equity in your trading account and if you trade currency markets with discipline you will achieve this.
The aim of trading currencies is not to have fun, it's to make money. All great traders understand this and you need to as well, if you are to become a successful currency trader from home. So put emotions out of your mind, what you have been taught by society and focus on, making money long term and you will win at Forex trading – it really is that simple.