Discipline vs. Greed and Fear

Terminology is an interesting aspect! People use the same terms but they do not always have exactly the definitions for them :slight_smile:

You are, of course, right that a good trading plan is also necessary, but a “trading strategy” as you mentioned earlier, in my definition, includes both a trading method [I]and [/I]a trading plan. In fact, one could maybe say that a trading strategy in its broadest sense [I]also [/I]includes risk and money management.

Another term which is used even more loosely is “percentage gain” as a measure of profitability. Percentage of what exactly! If it is percentage of account balance then it is totally arbitrary and meaningless and a totally useless yardstick for comparative purposes since the balance traders retain in their accounts is entirely a personal matter beyond the minimum to cover trading margins and buffers. To measure monthly profit as a percentage of account equity means nothing - but it is quoted all the time! :slight_smile:

I actually think most folks would define those things the other way around. Trading plan is the broad concept. Strategy or system is the specific entry/exit approach.

Another term which is used even more loosely is “percentage gain” as a measure of profitability. Percentage of what exactly! If it is percentage of account balance then it is totally arbitrary and meaningless and a totally useless yardstick for comparative purposes since the balance traders retain in their accounts is entirely a personal matter beyond the minimum to cover trading margins and buffers. To measure monthly profit as a percentage of account equity means nothing - but it is quoted all the time! :slight_smile:

Totally disagree. When we talk in percent terms it basically always implies a basis on account balance - including risk %. This normalizes things across traders. A 10% return for you and me may be different $ amounts, but we both know what it means for us. In contrast, a 100 pip gain means very little. It doesn’t provide any context in terms of risk.

Tips for those who wants to be more logical and at the same time to remain himself while trading:

  • Never forget that practicing discipline in your trading is the way you make money.
  • Be who YOU are, not who someone else is (don’t believe some rules will change you, cause you don’t need it)
  • Always live to trade another day.
  • The moment you find yourself praying for a trade to work, get out of it. You should trade with logic but not with luck.
  • Don’t hesitate, don’t over-analyze. If you see a good signal, start transaction. Don’t waste your time on over-thinking.
  • If nothing’s happening with a trade after a reasonable period of time, cut it loose. It won’t work anyway.

This is precisely the contradiction that makes quoting percentage gains totally arbitrary and meaningless. It does not “normalise things across traders at all”.

If Trader A and Trader B do exactly the same trades during a month but trader B has twice as much equity lying in his account then their results are identical in both monetary terms and in the risks they have assumed. But their percentage results for the monthly are entirely different and are therefore completely meaningless for comparative performance measurement.

It would make sense if the equity balance would be somehow related to the positions taken, but it isn’t. The amount that a trader retains in their account is entirely arbitrary. ALso, some traders spread thei total equity across two or more accounts, in which case the decision as to what balance is the basis of percentage is even more unclear.

Discipline is a must on trading. If you plan to trade once a day, then once you get out from the market, do not think to trade again even if your lose or with big win. Do not even think to make another big win or recover your losses for the day. Always happen, when people win, they always want to trade more and more and at the end, the big win before end with losses and the small losses end with even bigger loser.

I agree. Trying to compensate at any cost for a loss you’ve incurred on the same day usually only leads to more losses.

Yes indeed, sadly one doesn’t get to such a conclusion easily haha

Back to OP, yes indeed discipline is key to surviving the market at least, but in order to survive the market, keep your account, and making profit, you need more than discipline. Other members in here posted good replies regarding discipline + risk management + trading plan, etc…

I’ve been there and I’ve done that - trying to compensate for losses, I mean - and I agree, it’s not easy. Nor is it adviseable. One’s already emotional and making mistakes because they’re not thinking clearly, and then those mistakes compound each other.

“Greed is Good” …-GG

To some extent yes but I totally disagree with greed being good in most cases, reason being once some new traders assimilate greed being good they will turn to overtrade and might incur more loses .

Greed is not necessarily good in all cases. If it clouds your judgement and make you take more risk than necessary it can cause you problems.

Going right back to the start of the thread, the discipline to follow the rules of your strategy is essential. But a rule that defines the strategy’s success as a return per week in cash is just irrelevant. You might as well have a rule that says stop trading when it gets cloudy - it is not a rule derived from trading, TA or fundamentals, it will not sustain your success.

I also believe it’s good to not “screw everything up in one day”. If the deal had to be closed or close on the stop on it’s own, it’s better to not open any new deals that day at all. and not only with that pair, but in general.

I do that as well, if I make mistake. I step back for a day or so, analyze my error and then I return to trading.

Well Mike18 and dianajs, I understand what you’re saying - stepping back from trading for the rest of the day / week etc. removes the emotion, prevents revenge trading, breaks the compulsion to be in the money by the end of the session etc.

But if you have a well worked out plan and followed your plan, there is no error. The losing trade was just one of the inevitable statistical incidents of a trade going against you. If you made no error, keep trading, just make sure you followed your plan to the letter. Changing the plan in mid-session (or mid-week for longer-term traders) is just asking for a knee-jerk revision - best left for a weekend or a day off or a week off.

Help yourself by emotionally detach from money you trade. Focus on trading process. Or if this help, enter a trade, set the targets and close your platform

Hello jantopem,
Everyone can create or just follow a successful trading strategy but few traders have the discipline and the knowledge to ensure that their money management techniques are consistent. With appropriate money management, you will be able to build your account, generate revenue, and avoid any potential shortfalls that could end your trading career.

disciplin comes only with experience. so if youre not disciplined enough yet just give it time and it will come by itself. but take care you dont run out of funds before your disciplin is where it should be.

thats the survival every trader must go through. the natural selection.

I think it is a different approach that works for each individual, but personally I do not believe artificially restricting your trading time based on your results for the week (or any other timeframe) is sustainable. It creates an unhealthy relationship with the forbidden fruit (the market) that will eventually end in most people devouring the forbidden fruit and guiltily enjoying its pleasures regardless of the consequences just like in the famous old story.

I believe the best way to approach trading from a psychological viewpoint is to trade free from irrelevant distractions and the noise. Set your risk management based on account size, and then trade the market based on the systems you are comfortable with. If the market meets your criteria 10 times per day, trade 10 times. If it doesn’t meet criteria that day, don’t trade. And always remember to trade the market as it is, rather than how you think it will/should be.

Like many, I have learned a lot of this the hard way…

I think discipline is by far the most important element needed to trade successfully, followed by risk control, with the least important consideration being the question of where you buy and sell.