Strategy & Discipline


Woody Allen once said a stockbroker is someone who invests  your money until it is all gone. We are conditioned to think an investment is safe and sensible but it is often not the case.   The wise man is an investor who shuns wild speculation and abhors foolish gambling.

What  about a trader? To some extent, he  also shuns gambling but he is a speculator.  All successful traders have one common, yet very important ingredient in their trading methodologies: a game plan.

During World War II–the invasion of Britain was planned but never executed, while the Battle of Britain was executed, but never planned.  In the same way, many traders and investors go through their short investing lives planning trades they never execute and executing trades they never plan.

Success often follows the wise trader/investor who identifies an effective strategy and has the discipline necessary to carry it out.

The basic elements of a trading plan should provide the reason for logically entering and exiting a position, whether it proves profitable or not. Once a position is entered, the price can only take three paths: rise, fall or remain unchanged .

 Trading plans may be mental or written, but written plans are best.

 Other factors to log in a written trading plan include:

·         Reasons for entry into the position

·         Note the actual price of entry into the market, and how it compares with your planned entry price.

·         Note the stop-loss price level and the liquidation plan once the market is entered.  Also  the minimum profit objective and does it correspond with the risk involved in the trade.

·         The trader should check his record of closed profits and losses, to ensure that results generally parallel the plan’s expectations regarding profit or loss.

My mentor Ray Barros has a Risk Management Excel sheet for his students to plan before executing a trade.

All successful traders do their planning before executing their trades in some ways, and the results of the plan should  be parallel  with the objective and risks parameters. The trader should have a plan form that is complete for every trade, and a strong  discipline so that there is no significant  variation within his control between the actual and possible events.

Therein lies the path to making a successful  trade with  a strategy and discipline to execute the strategy, with the probability of winning the trade on his side.



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5 thoughts on “Strategy & Discipline”

  1. The superior man, when resting in safety, does not forget that danger may come. When in a state of security he does not forget the possibility of ruin. When all is orderly, he does not forget that disorder may come. Thus his person is not endangered, and his States and all their clans are preserved.

  2. Trading plan + risk management are crucial. However, in my opinion, one should also consider how important is the money put into trade. Is the money important to you? If it is the money you need next year to send your children to private school, I don’t think you can trade in a composed/disciplined manner.
    I have used the same trading strategy and risk+money management plan since three years ago. I can follow them more successfully now than three years ago because I’m have more money now. I stop breaking the rules to “save myself” or “make it big” as I did three years ago. I don’t think I have disciplined myself in anyway. It is just a different feeling on the money I put into a trade. Three years ago, the money in my trading account was important to me. Now, it is not so important even though it’s nice to have more.
    Not sure which category does this fall under. To me, it’s not discipline, trading strategy, money or risk management. Trading psychology perhaps?

  3. Hi

    I thoroughly agree.

    For me ‘Risk Capital’ is capital whose loss will not materially affect my lifestyle. That is not to say, the loss that results in ruin won’t hurt, it will, But the loss will not cause devastation.

    I also agree – I’d place it in the psychology category.

    BTW, I had a squiz at your blog,

    Good one.

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