By Sam Evans, Online Trading Academy UK Forex, E-mini, and Power Trading Workshop Instructor

If I had to name the one single key to successful and consistent trading results, it would be Discipline. In virtually every aspect of trading, we have to control ourselves because as I have stated time and time again in previous articles, human beings were never designed to be traders. Let's list some of the common reasons why most novice traders hit a road block with their activities:

1. They have little concept of protecting their capital and managing risk
2. They do not understand how price functions in the market place
3. They tend to base their trading decisions mostly on feeling rather than objective analysis
4. They hate being wrong and losing money
5. They constantly search for the perfect "answer" to all their trading questions
6. They listen to others

Each of these six listed points can be corrected and the answer always comes back to discipline each and every time. Actually if we explore the reasoning behind these "frailties" of trading, we can clearly see that apart from the first two points, which simply come down to common sense and the correct education, points three through six are actually the result of human emotion, which, in my opinion, is the root of all trading evil! Once a trader knows what he or she must do to be successful in the market, it just comes down to putting this into action and the only person capable of making this happen is the individual, not somebody or anything else. Back, therefore, to our friend Discipline and its need to be enforced at all times.

Trading for monetary gain is pretty much the most unnatural thing we could ever do, not because it is hard, but rather due to the fact that the majority of us have been culturally programmed to act and think a certain way and this is typically detrimental to our trading success. Okay, I know this sounds a little deep but stay with me for a bit while I explain. You see, it all starts from the moment we enter the world as a newborn child. As soon as we grasp the basic levels of communication, we are told that there are things we have to do and things we must never do. Now this should be beneficial on many levels as we need rules in trading for certain, however, psychological studies have shown that the more you tell someone not to do something, then the more they actually want to do it. If I tell you now that you must not think about an image of a blue elephant, you likely will anyway. Be honest, you are picturing a blue elephant right now, aren't you?! It is almost as if we are just rebellious by nature and this is certainly not a good trait to take into your trading career by any means. We need to understand the consequences of breaking rules in trading from the very start – this is why I always tell my classroom and Extended Learning Track (XLT) students to start with a small trading account, as there is a high probability of losing this money if the rules are not followed. As much as I tell a student not to trade without stops, it is likely that at some point, they will because they think "It won't matter for me, I am different," only to discover one day that they are just like everyone else in the trading world and can easily lose money quickly if they don't use protection. It is almost like we need to have the experience for ourselves, just to believe it can actually happen.

Soon, however, with more trading experience, we begin to get the idea and understand that sticking to a detailed trading plan is only going to help us to constantly enforce the necessary Discipline to make our trading work. We analyze the market patiently for only the highest probability, low risk opportunities; we use stop losses and then develop the ability that allows our winners to run. We don't mind getting stopped out now and then as it means just a small loss and the bigger winners help us to be profitable. We feel we truly understand that unemotional, disciplined trading is the way forward, until an odd predicament comes along to throw us off track: A string of losers. That's right, it still happens even to the most seasoned professional traders. Anyone who says that the pros never have losing streaks from time to time is not a consistent trader in my opinion. In fact, I know from experience that it is all down to odds and probabilities and anyone can find themselves on the wrong side of the probability curve from time to time – this inevitability is just the result of the chaos of nature itself. Understand and accept right now that nobody can win all of the time and when this concept is soundly grasped, it is then and only then that a trader can cross the threshold to a consistently profitable career in the Forex markets.

I know that from time to time I can get things wrong and even after all my years and hours in the market, I still have to stop myself from getting a little down about it, but over time, it just gets easier to deal with because I also know that my technique and strategy will serve me well in the long run. I almost get a smile on face after a drawdown period because I know that the odds are still on my side and the right call is just around the corner. Now guys, this is not down to blind faith or hope, but instead due to the fact that I have the belief in myself and my tried and tested trading plan. It just takes the Discipline to remember that my plan is my temple and I trust myself to be disciplined enough to follow the rules each and every day.

So you may be asking right now why did I choose to bring this topic up? Simply because at the time of writing this article, I started the morning with three successive stop outs and in all honesty, it dampened my spirits a little. Each trade was planned well in advance and ticked all of the boxes of my checklist, but all three failed. I had to ask myself the question, "Did I do something wrong?" So I decided to call time for a few hours and have a break from the markets and not force another trade. I disciplined myself to let things go on this occasion and took comfort in the fact that I had done all I could. I later came back to the market and moved onto a new asset with the same focused clarity of mind and waited for a similar setup on a different market. The trade got hit and worked out just as planned, covering my earlier losses from the morning and getting me flat for the day. Trust me, I know I didn't make any money today, but I am happy to end the session at breakeven with a 25% hit rate...that is my job as a trader. Tomorrow is another day and who knows, it could go the same way as today, or turn out much better. All possibilities aside, I accept the fact that I never really know the outcome of any of my trades but I always know exactly how I will enter the market and manage the trade each and every time. My consistency lies in my plan, not in my day-to-day results. Enforce Discipline and go with the flow: Focus on the execution, not the consequences, and just remember when enough is enough.

All the best for a green week,

Sam Evans sevans@tradingacademy.com

DISCLAIMER:
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results.

Reprints allowed for private reading only, for all else, please obtain permission.