Trading Discipline


The biggest mistake a trader can make is to be stubborn. If the evidence changes, or if the market is acting differently from what you had envisioned, then get out/or even reverse. Do not indulge your own ego.

It`s not about being right. It`s about making money.


It`s so simple to say "be disciplined." It unfortunately is a skill that one must hone through years of practice. Some people are better at discipline than others.
Why is it so hard? Because discipline requires great knowledge of one´s own psychological weaknesses, comfort zones, and boundaries. Not many people have that, surprisingly.
Also, because sometimes being "disciplined" will lead to whipsaws. In fact, markets do often reverse after you stop out. However, you need to trust your system and craft that, over time, being disciplined will payoff. Being disciplined is the only way that will maximize your chance of long term survival.

Money Management - Keep Losses Small

You are not going to be right most of the time. So keep losses small. Let your winners pay for your losses.
On the flip side, you MUST, MUST, MUST extract as much money as possible from winning positions. It is extremely tempting to close out positions, when you are up 2%, 5%, or even 10%. But you need to let yourself take in the two, three, five, ten baggers than will pay for 10-20 losing trades.
Finally - Pace Yourself , i.e. Don´t Try to be a Hero Without Having Thoroughly Tested the above three Elements.

Risk : Reward

Risk reward is the most important aspect to managing your money in the markets. However, many traders do not completely grasp how to fully take advantage of the power of risk reward. Every trader in the market wants to maximize their rewards and minimize their risks. This is the basic building block to becoming a consistently profitable trader. The proper knowledge and implementation of risk reward gives traders a practical framework to do this.

Many traders do not take full advantage of the power of risk reward because they don’t have the patience to consistently execute a large enough series of trades in order to realize what risk reward can actually do. Risk reward does not mean simply calculating the risk and reward on a trade, it means understanding that by achieving 2 to 3 times risk or more on all your winning trades, you should be able to make money over a series of trades even if you lose the majority of the time. When we combine the consistent execution of a risk / reward of 1:2 or larger with a high-probability trading edge like price action, we have the recipe for a very potent Commodity trading strategy.