How you can reduce the effects of emotion and negative psychology?

The answer is discipline! Without it you will lose.


Discipline in the following three areas of trading will ultimately determine your trading success.

Training

The successful trader never rests on past successes, or believes that his trading ability has peaked.

He is always learning, practicing his decision-making skills and honing them until they become second nature. Then he can react faster than a speeding bullet, but with the benefit of superior human judgment.

Trading Rules

The successful trader develops a set of trading rules - a plan - that he follows religiously. This guides his decision-making at all times. If a trader`s plan dictates that it is time to exit a stock, the trader will exit that trade and not wait a minute longer.

Self-Control

Successful traders display an extraordinary amount of self control.

Keeping emotions constantly in check, the disciplined trader is immune to the highs and lows that attend large market swings, whether panic, in a downturn, or of euphoria. I will show you how to learn the secrets of discipline.

These components may seem like a tall order. But that is exactly the point; trading is difficult work and serious business, demanding time, patience and a great deal of hard work. Master these components and you are on your way to success. Step off the straight-and-narrow path of discipline you will meet certain financial ruin.

The key message about discipline is that without it you will lose. It is that simple. You may think, "I understand and I will be disciplined in my trading." Nevertheless, this is where fear and greed enter into the picture. Shortly after this, an emotional rollercoaster ensures the stability of your character.

Can Discipline Be Learned?

The big question here is this: Can you develop the discipline you do not have naturally? I believe the answer is "yes, you can," but you must have the necessary commitment to do so.
Clearly, discipline can be developed. You only need to look at an army training program for confirmation of this fact.

However, it is one thing to have a vast and experienced organization bearing down on you and being prepared to do whatever it takes to make its point. It is quite another thing to do it yourself in the comfort of your own home, with all of the distractions of daily life.
Clearly, self-discipline is a requirement even to start this process.

Ultimately, undisciplined behavior is going to be punished by the market, either by direct losses or by the loss of profits which otherwise have been available.

Private traders who persevere do have external stimuli that will help the process. However, the market does not help as much as it might, because of the principle of random reinforcement. It is the market`s tendency to reward bad behavior from time to time.

This crucial fact is one of the reasons why it takes so long to learn how to trade. You need to realize there is no point in having a system if you are not going to follow it.

To speed up the process of learned discipline, you can read the book Dr. Alexander Elder, author of "Trading for a Living".