Discipline: An Essential Characteristic of Successful Traders

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In the 1980’s, Jack Schwager was a struggling trader. On two separate occasions, he had managed to blow up a trading account, and his inability to trade with consistency led Schwager to ask some ultimate questions regarding how a person can become a successful trader. Schwager was working in the finance industry as an analyst, so he had many contacts on Wall Street and he even knew a few very successful professional traders; however, he simply could not produce consistent trading success himself. This conundrum led to an idea.

Schwager decided he would interview the top traders in the world in an attempt to unearth the secret of trading success, and then he would publish the interviews in a book. His goal was three-fold. First, he would be able to discover the secret to successful trading. Second, he would be able to share his findings with the world, and thereby help countless traders. And third, he would, of course, make a bunch of money selling the book!

Schwager went on to write the book Market Wizards, which is commonly regarded as one of the greatest trading books. Interestingly enough, Schwager discovered that not one trader he interviewed approached the market in the same manner. This was quite a fascinating insight. As a result, Schwager’s book showed that traders could implement a wide variety of trading strategies and money management approaches in order to profit from financial markets.

After Schwager wrote the book he began to notice that his true genius was not as a trader. Instead, he realized that he was quite good at identifying good traders; therefore, he established an investment fund that sought to allocate capital to emerging fund managers. Schwager proved to be quite successful at this. After his 20+ years of working with hundreds of traders from various backgrounds, Schwager stated in a recent interview that the one common characteristic among successful traders is discipline.

Discipline is Essential

If you are in search of the Holy Grail trading system, be assured that it is closer than you think. In fact, every seasoned, professional trader will agree that the Holy Grail is you! There is no such thing as the perfect strategy that will unlock an endless stream of profits. Once a trader realizes this, his attention will shift from external matters to internal matters. Internal matters deal with developing one’s trading psychology and an essential element of trading psychology is discipline. It is quite interesting to note that after 20+ years of working with highly successful traders, Mr. Schwager states this as the most important element of trading success and the most common characteristic among successful traders.

One of the greatest steps a new trader can take is to focus on developing discipline. Discipline includes many things, but it revolves around a trader’s ability to execute his strategy without fail and an ability to execute within his risk management parameters without fail. If a trader can do these two things, he still may not make any money, but he will at least increase the probability of not losing his entire stock or forex account.

Practical Step To Increasing Discipline

A major step toward flawlessly executing one’s strategy and risk management approach is to keep a trade log. This is not necessarily “fun,” which makes it difficult for most traders to do. However, if you can get in the rhythm of always writing out and journaling why you are going to enter a trade well before you actually enter it, then you will significantly decrease the amount of bad trades you take.

Discipline is essential to long-term trading success in any financial market. Take the action step today of developing a trade journal. If log your trades for a few days and then fall out of rhythm and stop doing it, do not feel bad. Simply start logging your trades again. Eventually it will become a habit, and your discipline as a trader will grow substantially.

Published 3 years 3 days ago