DISCIPLINE IN TRADING

Discipline
Michael Covel (February 16, 2005)

Ted Williams. The man epitomizes the word "discipline". Trend Followers, like Williams, wait for their pitch -- and then whack it for homeruns.

Now think for a moment about investment sites such as all of the stock tip chat houses. They are useless when it comes to helping you to make money in the long run. Why? There is no discipline. They say there is a good pitch to hit everyday. This is far from true.

There are typically three stages an investor goes through before they become successful. Building discipline starts with an understanding of these points:

1. Easy Money: The first stage involves thinking there is easy money to be made. This is the thinking of a newbie. Often, after a big stock tip gone wrong or a couple great broker recommendations that lose serious money, you enter the second stage.
2. I need a plan: The second stage begins when an investor or trader decides a plan is needed to win. The problems begin when the search for a plan becomes a search for the Holy Grail. And we all know there is no Holy Grail. What is needed is more than just a "system". What is needed is you following the system. This leads to stage three.
3. I'm responsible for my success: Stage three comes when the investor or trader realizes that success comes from inside the person, not outside. To achieve true success you must understand the market is not responsible, you are. There is no one to blame or compliment but yourself when it comes to trading. So find a solid plan and follow it.

Trend Following demands that you detach emotions from your trading and maintain exacting discipline. Trend Following, for example, can be a winning plan, but you must be disciplined to do the hard (and right) thing everyday.