In this part of active trading tips we will discuss patience and discipline. Simple, right? Just be patient and stay discipline and we’re good to go as traders. Uh, no….not so simple. In order to do something well, we need to understand what actions to take and what benefits are created by them.
This helps us not only focus, but gives us motivation to do them because in the end we are results oriented people. If I do A, then I get B.
Practicing Patience When Trading
As a trader it is important for two reasons. First, it improves our trading results. How exactly? By increasing our success rate on trades because we are waiting for only clean and clear setups that meet all our trade setup criteria.
The second is that it lowers our trading costs. This is done because, by being patient we do not over trade and rack up unnecessary commissions. Over trading hurts is in two ways; not only are you racking up commissions but you are also taking on poor setups which have a lower success rate.
These are the reasons we need to stay patient.
This mainly includes your trading rules. You have rules that are part of your trading plan, well – atleast you should have rules if you do not already!
Staying discipline entails following your rules as well as following your schedule. Let me explain this further. When you setup your trading plan you may have listed times you do not trade, such as during lunch time. Maybe you took it a step further and said I don’t trade after hours.
Anytime you go ahead and trade during those times, you have jumped off schedule and broken discipline which will likely lead to losses on a whole. Why does it lead to losses? Because if it’s in your trading plan then you have recognized it as something that is not profitable, thus you don’t do it. If it was profitable then you would not have it listed as something to omit from your trading.
As far as the rules portion goes; you have items such as a minimum risk/reward ratio that must be available to take a trade. If you begin taking trades that do not meet your risk/reward you will likely see your results worsen. By taking these trades you are breaking discipline.
Now that you can directly link losing discipline to items like the ones listed above, it’s easier to stop yourself from doing it. For example, if you see a trade that does not meet your minimum risk/reward ratio and are tempted to take it all you need to do is say “the info in my trading journal has shown me my results are worse whenever I make these type trades.” This will help keep you from losing discipline.
You can learn more about the benefits of keeping a trading journal and how to build out a solid set of rules in our course – Active Trading Blueprint. For more information click the following link: http://tradingeducationblogs.com/the-active-trading-blueprint-course/
Always remember – “Victory Loves Preparation”