Today's Guest blogger is Norman Hallett from The Disciplined Trader, and today he's challenged us to answer two very tough questions that ALL traders should sit down and think about. They have to do with our mental approach and Norman's one of the best at helping traders.
These are the first two questions of a 10 question quiz. If you want to see where you stand as a disciplined trader (or lack of it!) then take the whole 10-question quiz. It won't take much time and it's free. He's looking forward to your answers and comments!
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The following 2 questions will conjure up different visions for each person. The idea is to relate to certain trading experiences and what actually happened in such situations-not what sounds like the best answer. Moreover, if a described situation has not yet been experienced, try to make an honest appraisal of how you would act. Again, not what sounds correct but how you think you would actually correct. Remember, being a successful trader requires continuous and almost brutal self-appraisal.
There are no “perfectly disciplined” traders. But there are many traders who come close. This quiz is meant to help you assess where you are in your quest to be The Disciplined Trader and help you to identify areas that you may want to improve upon… because the way to maximize your potential as a trader is BE The Disciplined Trader, and adhere to your tested trading plan without hesitation.
The following are the first 2 questions (and answers).
1. You felt it in the pit of your stomach. Just by the way the volume jumped up, you could
sense the fear as if it were right in the same room with you. Should you bail out of your
position or wait to be stopped out? “If it doesn’t feel right then it’s time to get out,” you hear
a small voice in the back of your head say. You act quickly and close out all of today’s
positions. “Better safe than sorry,” you mutter; your hands still trembling. Has this ever
happened to you?
(1) Too often
(2) Sometimes
(3) Just once in a while
(4) Never
(Choose FIRST, then read answer)
Answer: If you want to become a successful trader, this scenario is one that must be
overcome and controlled emotionally. You see, fear and greed are always present and a
trader can’t let themselves be swayed by emotions. “Listen to your heart” may be valid
for some things, but not trading. A trader must be patient-even when things seem to be
speeding up and going out of control.
If your plan calls for certain stops to be set, then you need to learn to have confidence in
them. In other words, once a position has been taken, stick to the plan. How many times
will you see a moment of panic followed by a deluge of buying or selling in the opposite
direction? And this is usually followed by your fellow traders shaking their whipsawed
heads. Be patient and learn to trust your system. Besides, if you have done your home-
work on the trade, you should have hedged yourself against a catastrophic move. You
will always do that, right?
2. When things get tough, it’s good to be able to shut the world out and concentrate on your trading activities. Focusing on your trading helps to block out some of those pesky
domestic problems. Some mornings, however, you feel a little out of sorts and need
some extra self-discipline to get started. How often is this the case for you?
(1) Too often
(2) Sometimes
(3) Just once in a while
(4) Never
(Choose FIRST, then read answer)
Answer: Even though traders are taught to trade as mechanically as possible, there are
times when being human can demand attention - on both conscious and subconscious
levels. Denial, emotional stress and other aspects of living can have a subtle influence on
how we make decisions. We may tell ourselves that we are strong enough to “play
through the pain” but a wise trader understands the need to be free from distractions, even
those we suspect might or might not be there at all.
One of the more important advantages of developing the “Zen of trading” is getting in
touch with who you REALLY are and that includes your weaknesses. For example, if
you know certain situations upset you, even though you may not feel it, the wise trader
will push back from the table, stand up and stretch, and decide that today might be a good
day to play some golf or just read a book. Tomorrow is another day and another
opportunity to trade. No need to push things. Keeping complete focus on your trading
activities requires you also have an honest focus on yourself.
Cheers,
Norman Hallett
To test yourself I highly recommend taking the 10-question quiz today.
I tend to agree with the first arrticle in that it is not so much knowing your inner self as much as developing a skill by employing months and even years of screen time through your own observations of the markets. I've done that, (and grateful that I did accumulate enough money to stay out of work for 3+ years to observe and learn how the market moves), as a result I've learned these setups so well because of how so very often the market would repeat its moves over and over day after day.
But patience and discipline are as important as anything else in the learning process.
Norman,
Thank you. I have seen myself in both those situations so many times in the past, still seeing them now - but a lot less! I actively think about both these issues as they arrive and make out to do something about them. I'l still a loser as a trader but the discipline thing - I'm learning that!
I find such mind game articles not very helpful and mildly annoying. Such articles are akin to the mission statement, team building, team alignment and other soft skill crap most of us were force fed in the corporate world while the business foundation rotted around us. This is not to say the mental side is not important but I think it is wrong to emphasize this component. It is like a mediocre athlete working on his head before building a strong physical base. There is no way some 200lb fat guy is going to run a sub-3 hr marathon based on positive or level headed thinking. Perhaps that's why today's businesses are so screwed up.
It comes down to one thing - DISCIPLINE.
Discipline to learn both the fundamental and technical side of trading.
Discipline to learn about market structure and inter-market analysis.
Discipline to learn trading instrument screening and selection.
Discipline to learn risk / money management.
Discipline to learn and implement entry and exit set-ups
Discipline to turn risk management and your set-ups into a written trading plan.
Discipline to follow the plan and act or not act accordingly.
I am still learning the trading game but like all things in life in order to survive and thrive you need DISCIPLINE.
All of us on the learning path would be better served by keeping our eye on the ball, not preoccupied by trying to get in touch with our inner self. If you need to do that don't trade, you will end up making someone else money and you will become fat, happy and poor eating trading junk food.
Right on!!!
Dear Sir
This is a Five- star article .
Phien .