7 Effective Tips For Building Trading Discipline

By Galen Woods ‐ 4 min read

Trading discipline is the key to realizing your trading ambitions. You must be able to stick to your trading plan and do what gives you your trading edge.

How To Build Your Trading Discipline

Trading discipline is pivotal to your performance and survival as a retail trader. As an independent trader, you don’t have managers looking over your shoulders. A single lapse of discipline can severely damage your trading account, not to mention your confidence as a trader.

However, typical tips to improve trading discipline might not be helpful.

The problem is this. You need to be at least somewhat disciplined in the first place to follow the usual advice.

This is why I tried my best to avoid trading tips like “stick to your stop-losses” and “don’t let a winner become a loser”. These tips paraphrase roughly to “be disciplined and follow your trading plan”.

Instead, we’ll focus on designing conditions and creating mindsets that are conducive for maintaining trading discipline.

But yes, you still need the willpower to get started.

#1: Write Down Your Trading Plan

You cannot improve what you cannot measure. Your trading plan sets the benchmark for evaluating how disciplined you are as a trader.

Record deviations from your trading plan to evaluate your discipline.

You must not only have a trading plan in mind; you must write it down. It offers you a tangible reference and reminds you of what you need to do to maintain trading discipline.

Your trading plan is also helpful for identifying and reviewing common discipline issues. For instance, you might realize that you usually ignore your exit rules. This ends up with you giving your paper profits back to the market. This will help you zoom in on areas of improvement.

#2: Find A Compatible Trading Approach

A trader has options galore:

  • Trading horizons range from extreme high-frequency scalping to long-term market timing.
  • Financial markets range from common equity to options on futures.
  • Trading tools range from price action patterns to fundamental cash flow analysis.

Within this broad spectrum, you need to explore and settle on a single approach that works for you. Ideally, it should be compatible with your ability, personality, and lifestyle.

For instance, you are a sharp analyst. But you are not comfortable with making snap decisions. In that case, intense scalping is not for you. Swing trading or position trading is more compatible than day trading.

Strong compatibility goes a long way in helping you become a disciplined trader.

#3: Visualize Your Trading Process

Lapses in discipline occur when you’re careless or when you’re stressed.

A tip from famous Olympians: Use mental imagery to go through scenarios in which you tend to lose discipline.

The key to visualization is to be as detailed as possible. Focus on the emotions and physical sensations of your body reacting to a losing trade. Visualize how you respond by calmly sticking to your rules and taking a small loss.

Even a short visualization session helps to empower you with greater trading discipline.

#4: Get Away From Chat Rooms And Forums

A considerable part of sticking to your plan and staying disciplined is to stay focused.

Focus on what you set out to do, and do it. This is what trading discipline means.

If you’re switching between your charts and chat rooms, you cannot maintain focus. It’s all too easy to start second-guessing your plans. It’s a recipe for disaster.

You may browse chat rooms and forums for researching trading ideas. But do not engage them while you’re trading.

#5: Discipline Is Larger Than Trading

Adjust your mindset and understand that discipline extends to all areas of our lives.

If we are not exercising discipline in other areas of our lives, how can we be disciplined when confronting the market?

Examine other activities and slowly build up discipline in those areas. For instance, start exercising every day like you planned to. Small consistent changes contribute significantly to building control.

#6: Backtest, Simulate, Research

Knowing that you are doing the correct thing helps with maintaining discipline.

After consecutive losses, it’s tough to continue following your trading rules. It requires you to trust that what you’re experiencing is just a temporary drawdown.

But how do you know that it is temporary?

You will never know for sure. But you can be very confident of it - based on your simulated trades, backtesting, and experience.

So, do your research before devising your trading plan. If you know that your trading plan has a sound basis, you will find it much easier to maintain discipline.

#7: Develop Your Trading Perspective

It’s so difficult to stay disciplined as traders because our money and ego are at stake. Also, trading is a game of probabilities.

In many ways, trading is a real different animal compared to other activities. This is why you hear about successful professionals from other fields trying but failing to trade profitably.

Understanding the psychology of traders is of great value to building trading discipline. Peering into the minds of other traders helps you to examine your own.

Put your strategy research on hold. Devote more time going through this list of books on trading psychology.