What is trading discipline ?

T

toptrader0

I like this article about trading discipline, written by Van Tharp and Henry Pruden, and I wanted to share it.

Van Tharp is one of the Top Traders interviewed in Market Wizard, best known for his book "trade your way to financial freedom". Henry Pruden is Executive Director of the Institute of Technical Market Analysis and on the board of Directors of the Technical Securities Analysts Association of San Francisco.

The Ten Tasks of Top Traders are these:

1. Daily self analysis: Successful trading is 40% risk control and 60% self-control.
2. Daily mental rehearsal: Practice being disciplined in your mind before you trade daily.
3. Developing a low risk idea: Trade with the odds on your side with a defined risk.
4. Stalking: Wait for the entry. Utilize patience and don’t pull the trigger to soon.
5. Action: Take the entry when the signal is hit. Do not freeze up. Be definitive.
6. Monitoring: Keep an eye on what is happening with your position.
7. Abort: Be ready to cut your losses, when you are wrong and hit your stop loss.
8. Take profits: Use trailing stop or profit target when one is hit. Allow the market to take you out.
9. Daily briefing: Think through your trading & what you did right/wrong based on your trading plan.
10. Periodic review: Is your trading working? Do adjustments need to be made?

You can read the article completely here, in Henry Pruden Web site:

http://www.hankpruden.com/tentasks.pdf

Good luck.
 
Is it the intent of the thread to define discipline or to discuss how to achieve it? Or is it perhaps to be a discussion about how to create good habits?
 
I have heard several times that Van Tharp does not trade.
http://www.donttalkaboutyourstocks.com/market-wizard-dr-van-k-tharp/

So I take what he dishes out as what to do in a perfect world.
What do you do when cable goes out?
What do you do when PC freezes when you just hit buying the ask?
Best to brainstorm every possible problem and have an answer.

Risk control is part of your trading plan, there for it is defined, self control is not defined and is toughest part of one to work on, so I lean that 95% of trading is being able to follow one's own Trading plan. Sounds easy to do, but it is tough.
 
toptrader0 said:
I like this article about trading discipline, written by Van Tharp and Henry Pruden, and I wanted to share it.

Van Tharp is one of the Top Traders interviewed in Market Wizard, best known for his book "trade your way to financial freedom". Henry Pruden is Executive Director of the Institute of Technical Market Analysis and on the board of Directors of the Technical Securities Analysts Association of San Francisco.

The Ten Tasks of Top Traders are these:

1. Daily self analysis: Successful trading is 40% risk control and 60% self-control.
2. Daily mental rehearsal: Practice being disciplined in your mind before you trade daily.
3. Developing a low risk idea: Trade with the odds on your side with a defined risk.
4. Stalking: Wait for the entry. Utilize patience and don’t pull the trigger to soon.
5. Action: Take the entry when the signal is hit. Do not freeze up. Be definitive.
6. Monitoring: Keep an eye on what is happening with your position.
7. Abort: Be ready to cut your losses, when you are wrong and hit your stop loss.
8. Take profits: Use trailing stop or profit target when one is hit. Allow the market to take you out.
9. Daily briefing: Think through your trading & what you did right/wrong based on your trading plan.
10. Periodic review: Is your trading working? Do adjustments need to be made?

You can read the article completely here, in Henry Pruden Web site:

http://www.hankpruden.com/tentasks.pdf

Good luck.
More...
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TopTrader; i'll use a non trading example Dr Tharp used.Paper trading, paper targets, dry fire are NOT the same as live shooting match; but still helpful.Amen
 
In my own opinion, to create the discipline to stick with your strategy when things aren't going your way, you need to rigorously test the strategy so that you have a good idea of what to expect. Most people start trading without having a clue as to what to expect. They simply hope that what they are doing will work out.
 
Handle123 said:
[..]

So I take what he dishes out as what to do in a perfect world.
What do you do when cable goes out?
What do you do when PC freezes when you just hit buying the ask? .
More...


I would not be surprised if Van Tharp does not trade. And why would he when his book is selling so well ? The same goes for 99% of market timers selling you their newsletter for $9.99 etc.

I have been trading for 10 years and discipline was hard to learn and it will help you once you master it to do only one thing...not to lose money, not to lose your capital HOWEVER making money consistently is another story.

Just know that every single time you are trading you are tempted to do something stupid and you'll often think this time is different. Yet you stay disciplined and follow your plan no matter what.

The other thing that many don't talk about is that it takes a lot of money to make little money...in other words you better have a capitalized account because if you want to double what you have chances are you'll end up gambling and the market will dry you financially and psychologically.

When the cable goes out, you start using your second internet connection maybe trough your phone or device. Trust me no matter how expensive is the subscription to a data plan it will be always cheaper than the time you can't get out of your trade the very moment you need to.

Same thing for your pc you must have also a laptop. You should have two computers.

I lost count how many times someone told me that on a busy day everything went out they called their broker and from the time they called to the time the broker was on the phone and placed their order 25 minutes went by.

If you trade options and you have to place two trades short leg and long leg find a broker that lets you open your position at the same time. It might very well happen that after you open the first leg your connection goes out and you are 100% at the whim of the market because you didn't have time to open the second leg.

E-V-E-R-Y-T-H-I-N-G

every unfortunate yet unforeseen even that might happen to you it will happen and if you are not ready it will cost you a great deal of money. The ones that are able to keep going are survivors.

Trading discipline does not guarantee you to make one penny, but it is a necessary condition to keep trading.
 
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guy990opl said:
I would not be surprised if Van Tharp does not trade.
More...

He tried, but he failed miserably (his son used to post here). Which is why I always get a kick out of somebody bowing before his expertise.

A good psychologist can help others, but that doesn't necessarily make him a model of any given behavior. Same goes for sports coaches.
 
Greetings All,

I believe that Van Tharp was asked to participate in the Wizards book because Schwager was looking for someone to provide a psychological perspective to balance out the book,…not because he had any particular skill or mastery of trading. However, that didn’t stop him from hitting the seminar circuit thereafter, declaring himself to be a Market Wizard.

In any case, I like the following definition of Discipline:

“Discipline means, you have purposefully trained your rational mind, through the rigors of a skill set, to consistently execute a predefined systematic response, when your emotional mind is attempting to compel you into doing something else”.

KDASFTG
 
I find it interesting to read that van Tharp, one Market Wizard, could not cut it in trading.
Why did Schwager no find any person with a psychological training, or anybody who practiced as a psychologist who could trade?
why try to pass a psychologist for a trader when that was not the case?
 
i like this question:what is trade discipline?

easy answer 'i have faith!'

faith in what, you last trade success? or you backtest?

my 'discipline' lie in my acknowledgement that i can be wrong, too often

i can adjust, that my discipline

i can adjust
 
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