Adsense

Saturday, January 26, 2013

The Cost of Discipline – Part 1


We don’t derive satisfaction from gaining pips only or through some elusive Holy Grail. Disciplined traders get satisfaction from doing what they know is really right, even when they take losses occasionally. Some hate loss to the extent that, if he were a person, he would be lynched. Only a lack of knowledge would make someone give up trading because of a losing streak – something that market wizards know is normal and they constantly anticipate and control successfully. Expert traders measure real satisfaction from their level of discipline, as futures gains and losses are measured in ticks, currency market gains and losses are measures in pips, and as those of stocks are measured in points.

There are different aims for different market speculators. Certain speculators focus on risk control or having as low roll-downs as possible (and some may want to double their account every week). Yet, certain traders are making attempts to combine huge profits with less roll-downs, like fifty per cent per annum with no more than twenty per cent roll-down. No matter what you want, lot sizes are what should be used to attain your realistic trading goals. Given the importance of safe uses for lot sizes, all traders ought to take it serious. Yet, in reality, many rookies and even experts don’t bother much about this powerful tool. They prefer to focus on a magical methodology, trading instruments and market types. Though nothing is wrong with the aforementioned, they are ineffectual without the judicious use of lot sizes. Granted, a nice strategy helps you formulate sensible lot sizes in your trade, however, lot sizes are great in their own right. Why? By using too big lot sizes on small accounts, many traders have seen great roll-downs on those accounts even when they have superb strategies.

Why aren’t we disciplined? Do you hate to hear this? Well, without being disciplined, you’ll eventually find it impossible to outsmart the markets. Trading success is simple only when we’re disciplined do to what’s right. We find trading success elusive because we can’t be disciplined. Some know the grim consequences of certain hard drugs, but they still use them. We know certain types of junk foods that are detrimental to individual’s health, but we can’t desist from eating them. We know some dangerous lifestyles, but we still live them. We know what are morally wrong, but we find them appealing. We know the best ways to handle money, but do we do that? There are many more examples… As long as the markets exist, there would be disciplined and undisciplined speculators. Undisciplined speculators trade rashly, but blame others. Being undisciplined means knowing the correct trading styles, but doing something suicidal.


Our ultimate goal is to make decent profits from the markets (logically quarterly, on annual basis) irrespective of what the markets do. In order to achieve this goal, there are trading principles that must be incorporated into our speculative activities. The reality, however, is that, it seems that the human mind isn’t wired to be disciplined enough to do the right things. How can we be disciplined? And what are the advantages that might be derived from this? The part 2 of this series would talk more about it. These trading principles would be unfolded gradually.


Conclusion: Though you can’t change what’ve happened to you in the past, you can take steps to ensure your success in the future. All over the world, there are people that, regardless of their nationality, skin, color, ethnicity, or language enjoy success in the markets. Yes, a bright future awaits serious traders!

The quote below ends this article:

“A trading system idea might look like it won’t work, but the more knowledge you have about yourself, and the more you understand yourself, the better you’ll be at determining whether you’re looking at the truth or a belief. The systems that work in the markets are so much simpler than any I would have thought possible, and the potential returns are so much bigger.”  – Frank Eaves


No comments:

Post a Comment