Steps to Improving Your Trading Patience And Discipline

Steps to Improving Your Trading Patience And Discipline

Patience in trading is the ability to wait to take action until it’s the right time. Ego, impulses, boredom, and greed, can overcome a traders resolve and cause them to take action too soon or too much. Patience is the ability to follow a trading plan in real time with discipline and focus.

Discipline is the self-control to only take the right actions at the right times defined by your trading system. Emotions can overwhelm discipline and cause traders to take actions outside their system guidelines as they want something more in the current moment than they want to follow their plan.

Mindful Awareness of Emotions

Emotions are unavoidable as a trader, the key to managing them is to be aware of the feelings and inner narrative as they arise. Traders can feel hijacked by emotions at times and even start taking actions they know they shouldn’t. This occurs when stress, greed, fear, or ego becomes louder mentally than your trading plan. Traders start to think that the loud inner dialogue is them, a trader loses the space between their own thoughts and physiological impulses of emotions on their body and thoughts.

The key is to stay mindful of your emotions and thoughts. Stay mindful of your feelings and be able to continue to think: “I can feel the stress I’m under, I will take my stop loss when it’s triggered to avoid a bigger loss.” Discipline is lost when you lose control of your inner dialogue and your emotions take over your thoughts. You can manage any emotions or thoughts as long as you stay aware of them in real time. Focus on mindful awareness of what you are feeling or thinking to stay in control of your actions.

Mental Model

A mental model is the framework you use to understand how the world works. Your mental model is your beliefs and filter for how you see the world and the principles you use to navigate it. You must choose your beliefs carefully.

The first core belief a successful trader needs is faith in the positive expectancy of their system if they follow it with discipline. If you understand that your trading system is profitable and why it will make money in the long-term it is much easier to follow it.

A trader must believe that the discipline for trading their system will be rewarded with profits over time. Chart studies, backtesting, and research are the key foundations to faith in your strategy that can lead to discipline in your execution.

How do you trade with patience?

Process Focused

A trader that is focused on the execution of their watchlist, signals, and position sizing will find it easier to have patience and wait. While a trader focused on making money, being right, and endlessly looking for a new trading opportunity will experience more stress, impatience, and impulses for action.

A trader needs to shrink down what they watch in the markets to a manageable amount of information. The inputs and action you experience should all be within the parameters of your own system. Focus reduces noise and temptations, limit your screen time, market scans, quotes, and you limit your temptations to be impatient and go looking for action outside your system.

Trading Journal

“If you can’t measure it, you probably can’t manage it. Things you measure tend to improve.” – Ed Seykota

Both keeping a trading journal and reviewing it can help you become more disciplined. You can become more patient with entries and exits when you know you must document them down on paper or on software. Also reviewing your past trades can both show you patterns in emotional errors like impatience but also holds you accountable for those actions in real time. When you know you are going to have to review your trades you will tend to make better decisions.

Keeping a trading journal is an act of discipline that forces the documentation of your decisions. A journal is a trading book you write about yourself in real time. It’s difficult to not measure your results, see the patterns in your behavior, and improve when you see the data. The discipline of keeping a trading journal can result in the patience to stay inside the guidelines of your system with all your actions.

To be a profitable trader you need three things:

  1. A trading system with an edge and the discipline to follow it.
  2. Proper position sizing per trade and the patience to wait for the right signals.
  3. The right trading mindset for following your system.

If you don’t have the right mindset for trading then nothing else will work. Discipline emerges from believing in your system so you stick with it and avoid temptations outside it. Patience happens from understanding it’s better to wait and win with your signals than to rush in and lose without them. The right trading mindset understands the randomness of short-term results but knows that in the long-term your edge will play out in your favor with discipline and patience.

Traders are entrepreneurs who must accept uncertainty, losing trades, and the stress of volatility in price action. The right trading mindset holds convictions lightly and stop losses tightly. Stubbornness, wanting to be right, and the desire to never lose are destructive habits in the trading world.

The right trading mindset is one that believes in their chosen trading method and the system they use to express it with real positions in the markets. A profitable trader knows losing streaks are inevitable so they embed risk management into their system with position sizing guidelines, volatility filters, and correlation guidelines.

The right trading mindset is:

  • Dedicated to following a system.
  • Focused on signals.
  • Disciplined with taking consistent actions.
  • Confident in the long term outcome.
  • No ego interference with execution.
  • Focuses on the process not the money. 
  • Manages risk on every trade. 
  • Stays within their circle of competence. 
Steps to Improving Your Trading Patience And Discipline
Image created by Holly Burns