One of the most difficult things to master in trading is mental discipline. This is because very few things will affect you emotionally like watching the real-time charts move for you, then against you, while watching your account balance move up and down.

This happens because humans are emotional creatures and when we finally muster the courage necessary to make a trading decision and commit our capital, above all else, we want to be right and have our decision confirmed by an immediate price move in our favor. We feel good when price action moves for us and we feel bad when it moves against us. This is because the market’s action is like a report card reflecting our latest test scores and by extension our self-worth and the numbers cannot be denied as they flash across the screen.

Very few are able to handle these ups and downs. Your emotions sway as the market seesaws back and forth. You feel good then bad then good again. You feel like the market is a judge handing down a sentence, giving and then taking away. Sometimes it seems to be out to get you and somehow knows when you have entered the market just so it can turn and crush you.

At some point, all traders have felt these emotions and more – the successful ones go on to deal with them through mental discipline. However, most traders fail, not just because of poor trading strategies but because they are simply worn down and unable to handle the emotional upheavals and the poor decisions that they cause and they are doomed from the start.

Can you see how we as humans tend to apply human emotions to inanimate objects such as money, markets and trading strategies? We can’t help it. We’re emotional creatures, but if you want to be a successful trader you must master mental discipline. 

This is where trading along side of someone who has walked this path can be very beneficial to your mental, physical and financial health. The market is not out to get you, it doesn’t know your positions or care when you enter or exit. The stock market is what it is. It is simply numbers that move up and down and when approached in the right way, with the correct strategy, in the proper time frame, it can be a very friendly place to invest and can return great profits to your account.

In order to become a successful trader, you must first have faith in a particular trading system or strategy that you are convinced will generate a positive return. Develop the mental discipline necessary to stay in the game and commit yourself to six months to one year of following that trading system to allow time to work for you as money is taken from the market in small increments.

Believe me, as difficult as it is to develop a positive return trading system, it is much more difficult to develop the mental toughness necessary to handle the emotional swings of trading with real money. This is why most people hand their hard earned money over to so-called experts and then bury their heads in the sand and hope for the best.

In reality, the value of assets that we believe are fixed is moving every day. If you own a home, the value of that home is moving every day, sometimes wildly. If you have savings in the bank, the value of that money (what you can purchase with it) changes on a daily basis. However, when we look at the balance in our savings account and it has not changed, we feel secure.

Because the value of these items are not flashing on a computer screen in front of us, in real time, we are able to put them out of our minds and not be affected by their constant change in value; therefore, we are able to own a car or a home and have a savings account.

It’s a slow process to develop the mental toughness necessary for trading and few are born with it. Most traders wash out because they simply commit too much of their capital at any one time, trying to get rich quick. They either blow out their account or they cannot handle viewing the constant changes in account balance so they drop out because of the pressure.

When you trade live and are watching your account and the markets move in your favor, two things happen. First, you feel euphoric and are flooded with positive emotions, and then you think to yourself this system is cool.  I should have committed more capital to the trade - just think of how much more money I could have made! This is greed having its way with you. It will cause you to commit too much capital, change the rules, and believe you got this all figured out.  Greed is your enemy! It will destroy you and wipe out your trading account.  Recognize it for what it is, understand its proper place, learn to keep it in check, because it is the main reason traders fail.

When the markets move against you (and they will), you are flooded with negative emotions bordering on depression with low self esteem. You think to yourself this trading system sucks.  I’ve committed too much capital to the trade - just look at my money vanishing into thin air!  It will never stop! Panic sets in and you pull the plug and quit, thinking to yourself I must protect my remaining capital before it disappears! So you cash out of your trades to stop the stress, only to watch the markets return to levels that would have restored your lost capital and even add to it. This is fear having its way with you.  It will cause you to bail at just the wrong time.  It will cause you to adjust your trading capital commitment when it should remain the same.  It will cause you to doubt yourself, your trading system, and believe the markets are just a rigged game to take your money.

Understand this! The only way to develop the mental discipline necessary for trading is to: First, find a simple positive return trading system that you can understand and execute and commit yourself to sticking with this one system for six months to one year without altering the rules, second guessing, or trying to improve on the results. Then, only commit very small amounts of your capital - so small that you can handle the small ups and downs in account balance.  This is the hardest part.  I even suggest starting with the virtual trade option in your account where you can become accustomed to the mechanics of the entries and exits without committing real capital. Then, and only then, start trading with small amounts on each trade, with the long term goal of conditioning your mind and emotions to the ups and downs in your account balance.

This is why it is so important to do these things:

• develop your mental discipline over time
• trade in amounts small enough that your are comfortable with the ups and downs of your account balance
• fight the temptation to get rich quick
• take a long term view of training the mind and emotions.

Understand the direct correlation between capital committed and the level of stress that has to be endured. These stresses can only be overcome by practice, patience, and time spent trading at smaller levels.

Remember the success of a trader is not in his or her system but in the discipline and faith that guides the trader’s decisions.

This is why it becomes vitally important to seek professional advice and guidance when making decisions about your financial future. Come join our team at Trade Like Mike – Take advantage of our research into trading systems, products, position size, money management and entry and exit signals. Allow us to provide the information necessary for you to become a successful trader and take command of your financial future. You don’t have to go to the school of hard knocks; you can go with a winner. You can Trade Like Mike.