Discipline is the last of my series on the 'Seven Deadly Sins of Trading.' But it is by far the most important of all.
It is also the most difficult skill to acquire. Some investors may be born with an ample level of this skill, but for many it is not something that just comes naturally.
In fact, many investors do not see that it is anything that they need to work on. They assume one just works with the level of discipline that comes naturally, or that one learns on the job.
I rarely hear of investors actually writing down what they mean by discipline, how it works and what actions this entails.
Let us look at what words we associate with discipline and how they relate to investing.
Discipline means:
- Order: Having a systematic approach; structure
- Self control: Putting oneself on the front foot; dictating to the markets and not the reverse
- Will power: The strength to stick to a goal or a decision or a path
- Commitment: The ability to pledge to the task started
The word discipline often has a negative connotation, but that does not have to be and in fact none of the above are words that could have a negative implication; they enhance, they empower!
In many ways some of the definitions overlap - but what is important is to find the words that ring true to you and to define in writing how they will be translated into reality when investing.
The term discipline also overlaps with many words we have used in prior articles - exiting, entry, stop losses, methodology. They all point to the same end goal of having a structured approach that has logic and rules.
If discipline is not something that comes naturally to you, I would go so far as to tell you not to put any serious money into investing until you have clearly defined this aspect. And if you don't know how to develop discipline in investing, you can always set little discipline exercises for yourself in other pursuits in life. Many people who have had weaknesses in life actually later become 'experts' by confronting their demons - e.g., Spiderman was once scared of heights!!
You can become a highly disciplined investor if you put your mind to it - and you will reap greater rewards as a result.
Enjoy the ride
Tom Scollon
Chief Analyst
Trading Tutors Team
