How To Improve Trade Execution (Discipline)
Mastering the Art of Discipline in Day Trading: A Step-by-Step Guide
Maintaining discipline in trade execution is crucial for consistent profits. When you execute trades well, it becomes clear whether your strategy needs tweaking or if your mindset is the issue. Consistency in sticking to a plan is key. For me, it has helped avoid overtrading and kept the demons of FOMO (Fear Of Missing Out) and revenge trading at bay. Staying disciplined also allows for quick adaptation to market changes.
But why do many traders struggle with proper execution despite knowing what to do? The answer often lies in the fear of failure.
Four Reasons Why People Struggle to Make Progress:
Desire to Make Money or Be Right: An overwhelming desire for profit or to always be right often overshadows disciplined execution.
Unhealthy Relationship with Loss: A negative attitude towards losses leads to irrational decisions.
Belief in Outsmarting the Market: Trying to eliminate losses from a trading system is unrealistic and harmful.
Short-Term Thinking: Focusing on individual trades rather than the next 100 creates inconsistency.
It's not about how much money you make, it's about how much money you keep. This mindset shift from making money to keeping it can influence how you approach trades and maintain discipline.
Every successful trader started where you are now. If they could do it, so can you!
Here's how to improve your trade execution, step by step:
Step 1: Approach Trades Like a Scientist
Develop a thesis, analyze the data, and refine your process over time through repetition. Trading is not about hitting a home run with every trade but about systematic refinement and learning.
Thomas Edison famously said, “I have not failed. I've just found 10,000 ways that won't work.”
He didn't let failure discourage him but used it to refine his approach. Apply this mindset to trading. Each trade is a learning opportunity, not a measure of your success or failure.
Step 2: Execute and Assume Losses for 20 Trades
Mark Douglas, in his book "Trading in the Zone," emphasizes the importance of accepting risk.
He said, "The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that 'anything can happen.'"
We often haven't fully accepted the possibility of loss, even with stop losses in place. This creates psychological barriers. By assuming losses for the next 20 trades, you inherently accept each risk. With the risk "paid" in advance, you can objectively test your system and refine it without emotional interference.
Step 3: Believe You Are Already Disciplined
Bob Proctor said, "Faith and fear both demand you believe in something you cannot see. You choose."
Discipline starts in your mind. If you keep saying, "I'm not disciplined yet, but I will be," discipline remains a moving target.
Act as if you're already disciplined, and you'll make trading decisions that reflect this. This mindset shift is crucial. By believing you are disciplined, you eliminate self-doubt and reinforce positive trading habits.
Conclusion
Improving trade execution is a journey. It requires a blend of scientific approach, acceptance of risk, and a disciplined mindset. Remember, every successful trader started from scratch. They faced the same fears and challenges but overcame them with discipline and persistence. If they could do it, so can you.
Trade smart, stay disciplined, and keep refining your process. The path to consistent profits is a marathon, not a sprint.