Emotional Discipline in Trading

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by Gavin in Blog
February 10, 2024 0 comments
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Today, we are going to rant about (I mean, talk about) emotional discipline in trading.

Oh, no.

Not another lecture on trading discipline.

Okay, if you can muster the discipline to read this article, you will be rewarded with a bit of humor midway into the article.

How about that?


What Is Discipline In Trading?

Discipline is being able to do something you don’t want.

Of course, you don’t want to log your trades, journal, etc.

But having discipline means doing it anyway.

Discipline means that if the stock price runs away from you, you don’t chase it and buy it at an unfavorable price due to FOMO (fear of missing out).

If you have a trading rule in place to not let a winning day turn into a losing day, then discipline means having the ability to stop trading when you know it is time to stop trading.

For example, if an intraday trader has a daily target of $500 a day.

And they are at $400. And a couple of bad trades draw down their P&L to $200.

They have lost 50% of their gains, and their rule tells them to quit.

But the urge to regain the loss is too great, and the greed for hitting the daily goal is too strong.

They continue to trade the afternoon session only to end the day with a negative P&L.

That is the worst feeling when you are up on the day and give all the gains back and then some.

Discipline means following the trading rules when one’s emotion wants to give that rule an exception.

Traders have difficulty sitting on their hands doing nothing and waiting for their setup to appear.

They want to trade because they are itching to make money.

Having discipline means not pressing that “order” button until a valid setup appears.

It is not to force trades or take trades based on whims.

An Exercise In Discipline

A meditation educator once challenged the class to do one minute of meditation each day for 30 days in a row.

One would think this is easy.

One minute is shorter than some stoplights.

But when the students tried it.

I’m not even sure if any one student had the discipline to try it.

But let’s assume some students tried it; they would find this incredibly difficult (especially for those who have never meditated before).

No one wants to sit around doing nothing.

It requires much discipline just to perform such a simple act.

I said “simple” act – not an “easy” act.

There is a big difference.

Trading, also, is “simple” –press some buttons to buy low and sell high.

But it is not “easy”.

No doubt, many people enter into trading for the first time thinking it is easy, only to find out that it is one of the “hardest ways to make easy money” – not my quote, but from the Internet.

The trick is to reframe and not think of meditation as “doing nothing” but rather actively “meditating.”

When waiting for our trading setup to appear, we are not “doing nothing.”

We are actively practicing patience.

Next is the story of a trading educator who once told the class something like this (paraphrasing).

“Okay, for your homework. Pick 20 of your favorite stocks. For each stock, look through one year of candlesticks, looking for this pattern. Tally in your notebook how many times this pattern succeeded or failed. I know you guys are not going to do it. But that’s not my problem. I can not help with that.”

Perhaps that is a little bit cynical.

Perhaps there might be one person in the class who had the discipline to do the homework.

And it is likely that is what makes it possible to become a successful trader.

Is Discipline Inborn Or Learned?

Surely, some innate traits make someone naturally more disciplined than others.

Psychologist Walter Mischel conducted an experiment in the late 1960s and early 1970s.

The experiment typically involves a child, usually around 4 to 6 years old, who is placed in a room with a marshmallow (which is a very tempting treat for a kid).

The child is then given a choice: they can eat the marshmallow right away, or if they can wait for a specified period (say 15 minutes), they will be rewarded with a second marshmallow.

The main objective of the test is to observe how well children can delay immediate gratification in favor of a greater reward later on.

Researchers found that children who could wait tended to have better life outcomes in terms of academic achievement, health, and other measures of success.

However, in the nature versus nurture debate, the influence of genetics or inherited traits is considered relatively minor compared to the impact of environmental factors or experiences (nurture).

Of course, discipline can be learned.

This is what professional trader David Paul said at a trading seminar:

“Can discipline be built, or is it god-given? Of course, it can. Why is it that a little man like me is in the gym this morning at half past six? Why? Twice a day. Okay. Did it take any discipline to get me to the gym this morning? [pause for effect]  None.  None, what-so-ever. The paradox is that if you got it, you don’t need it.”

And then the audience laughs.

This is the humor part.

What Other Successful Traders Have To Say About Discipline

Victor Sperandeo is a trader and author who is recognized for his expertise in futures and options trading.

Throughout his career, he has shared valuable insights on trading psychology and risk management.

And here is one of his quotes:

“The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.”

IQ tests measure intelligence.

Emotional discipline is often referred to as EQ (emotional quotient or emotional intelligence); this is more difficult to measure.

Emotional intelligence is recognizing, understanding, managing, and effectively using emotions in various situations.

Mental discipline is the ability to control emotions, such as fear and greed, which can lead to impulsive and irrational trading decisions.

Successful traders maintain discipline by sticking to their trading plan, managing risk, and avoiding emotional reactions to market fluctuations.


Congratulations, you’ve made it to the end of the article.

It looks like you have discipline – enough discipline to become a successful trader.

We hope you enjoyed this article on emotional discipline in trading.

If you have any questions, please send an email or leave a comment below.

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.


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