Patience and Discipline

Professional traders know that their emotions are going to affect their trading whether they like it or not. As a result, they develop personalities that allow them to overcome their emotions and trade profitably. Two of the most important personality traits are patience and discipline, because they allow you to handle one of the most difficult aspects of trading.

Making Up Trades

Possibly the most emotional time for a trader is when their profit / loss is negative, and they are waiting for their next trade to come along. During this time they will be impatient and anxious, and they will be desperate to take their next trade in order to make back the money that they have lost. Most new traders (and also many experienced traders) will start taking trades that are not part of their trading system (known as making up a trade). As soon as this happens, their loss will increase, and will continue to do so until they realize what they are doing and correct their behavior.

Accepting Your Emotions

The solution to emotional trading is not to try and remove or control your emotions (good luck if you decide to try), but to develop character traits that allow you to control your response to your emotions. By developing a personality that counteracts your emotions you will be able to continue making logical decisions, even when your heart is pounding and sweat is streaming down your face (maybe this is a slight exaggeration).

Patience and discipline are vital personality traits for professional traders. Being patient allows you to wait for your next trade regardless of your current profit / loss, and being disciplined allows you to take only trades that are part of your trading system (not making up a trade). For some traders, the thought of losing money is enough to make them instantly patient and disciplined, but for others, the emotions are too strong, and they need to cultivate their patience and discipline.

Trading Log

One method of learning how to be patient and discipline is to keep a detailed log of every trade that you take. At the end of the day (or week, or month), replay every trade, and compare the replayed trades to your trading log. If there are any differences, you should be able to determine what caused them, and hopefully know what you need to avoid the next time.

Another method of becoming patient and disciplined is to have absolute confidence in your trading system. Knowing that your trading system will make money over the long term can be enough to overcome the negative emotions that occur when you are experiencing a negative profit / loss. The only way to have confidence in your trading system is to test the system throughly. If you have tested your trading system over a significant length of time, and it is consistently profitable, there is no reason to question that it will continue to be profitable.

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LAST UPDATE June 13, 2012
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