While reading or learning about how to trade one of the points that is re-iterated again and again is ‘Discipline’. We traders are aware that in trading everything else is easy and straight forward expect maintaining discipline and controlling emotions while trading. Some say that meditation and yoga help in managing our emotions and be disciplined. I somehow did not find them useful for me. So I could not do much but get the help of external controls to manage our emotions and maintain discipline.
Here is a list that I have prepared. When you start reading them you may find that there is nothing new that I have created. They are all the same old things like what Jesse Livermore the legendary trader said “Another lesson I learned early is that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again.”
Create a Trading Plan:
Develop a comprehensive trading plan that includes your risk tolerance, profit goals, trading strategy, and criteria for entering and exiting trades.
Stick to your plan and avoid impulsive decisions.
Risk Management:
Determine the amount of capital you are willing to risk on each trade, and set stop-loss orders to limit potential losses.
Avoid risking more than a small percentage of your trading capital on a single trade.
Set Realistic Goals:
Establish achievable daily or weekly profit targets. Be realistic about what you can accomplish and don’t set unrealistic expectations.
Educate Yourself:
Continuously educate yourself about the financial markets, trading strategies, and technical analysis.
Stay informed about economic events and news that could impact the markets.
Practice with a Demo Account:
Before risking real money, practice your trading strategy with a demo account to gain experience and build confidence.
Stick to a Schedule:
Treat day trading like a job and establish a consistent daily schedule.
Set specific trading hours and avoid overtrading, as excessive trading can lead to emotional decision-making.
Monitor Your Emotions:
Be aware of emotional reactions such as fear, greed, and overconfidence.
If you find yourself deviating from your plan due to emotions, take a step back and reassess before making any further decisions.
Review and Learn from Trades:
After each trading day, review your trades to identify what worked and what didn’t.
Learn from both successful and unsuccessful trades to improve your strategy.
Stay Disciplined During Winning Streaks:
Just as it’s important to maintain discipline after losses, it’s equally crucial during winning streaks.
Avoid overconfidence and stick to your established trading plan.
Continuous Improvement:
Adapt and refine your trading plan based on your experiences and the changing market conditions.
Stay open to learning and adjusting your strategies as needed.
Avoid Chasing Losses:
If you incur losses, avoid the temptation to chase them by making impulsive and high-risk trades to recover the losses quickly.
Stick to your risk management rules and maintain a level-headed approach.
Take Breaks:
Day trading can be mentally demanding. Take breaks to refresh your mind and prevent fatigue, which can lead to poor decision-making.