Importance of Trading Psychology and DisciplineImportance of trading psychology and discipline is often overlooked when first attempting to learn how to trade.  After all, the markets either go up or down right?  Wrong.  The markets will do whatever they want.  They go up.  They go down.  They go sideways.  They can make wide bars that jump over stops (meaning the stop price was never touched) and devastate an account.  The markets can go up and up and, just as a trader decides to go with the flow, they reverse.  The importance of trading psychology and discipline will either make you a successful trader or, if lacking, make you an unsuccessful trader.  The choice is really yours.

The last week or so I have been writing articles on trading psychology and the power of positive thinking.  But what about discipline?  Is trading discipline the ability to follow your rules or does it go a deeper?

Importance of Trading Psychology and Discipline

Trading psychology and discipline go hand and hand.  It is the ability to think positive and the discipline to take the steps to do it everyday.  In other words, the discipline portion is the routine that you implement everyday to think positive and control your thoughts and actions in a positive manner.  Discipline is not just the ability to follow a set of rules but all the routines that enable you to follow your rules.  For example, after a late night on the town, do you still get up at the same time and perform the same routines?

Jocko Willink was US Navy Seal who retired in 2010.  However, even now five years after his retirement, his morning routine are as intense as ever.  Willink, the former commander of Task Unit Bruiser (one of the most decorated special operations units in the Iraqi War) wrote that one of his guiding principles is “Discipline equals freedom”.  He still begins every day with the same routine as when he was a US Navy Seal.  In his book Extreme Ownership:  How U.S. Navy Seals Lead and Win, which was co-written with his former platoon commander and business partner Leif Babin, Willilink writes:

The discipline comes in in setting a schedule and sticking to it so that your day begins with an energizing accomplishment, not a demoralizing stretch of time where you lie in bed and hit snooze on your alarm a few times. Every morning should start off with a predictable routine.

What is your routine to begin your trading day?  Or do you even have one?  Discipline is the art of designing a routine and the follow-through needed to perform it everyday.