by Sam Evans
Trading discipline is simply a hard skill to master. With dreams of making big money in the fastest possible time, the vast majority of novice and beginner traders typically learn this lesson the hard way. Being disciplined and patient is pretty much the last thing on the rookie trader's mind in the early stages of their career. They want to make money and get results quickly after seeing and hearing how the professionals do it and aspiring to reach these upper echelons in the shortest possible time. As a full-time trader myself, I completely understand this scenario all too well, from my own personal experiences and also from teaching around 500 students through Online Trading Academy. I had to learn to control my money and my emotions the hard way and I now take pleasure in teaching students of the market around the world how to avoid the mistakes I made in the early days.

In one of my recent Extended Learning Track (XLT) sessions, I was sharing with the class some ideas on how they could learn to keep things under control when they are trading. They asked me how I learn to be disciplined in my trading and I said that after putting together a solid trading plan, learning to control loss and then applying consistency, really all it comes down to is keeping myself in check and to be honest, I used to find this difficult at times! I am only human after all with the same emotions as everyone else. I told them how I went to get some help from a coaching friend of mine and how his suggestions enhanced my trading considerably. It should be noted that he is not a trader. His area of expertice is in streamlining and increasing an individual's performance in their subject field, and this is what I especially liked about working with him.

You see I already understood the importance of risk management, was working from a trade plan and had trained myself to look for the best low risk, high probability trades, but something was missing. I didn't want to be advised by another trader as I was happy with my trading skills. In essence, it was me who was making errors in how I managed myself and maintained my discipline, so the work required needed to shift to my persona and attitude before I could witness any further breakthroughs. My coach suggested I carry out a simple exercise in my daily trading routine and made me implement it and follow-through with it for a couple of weeks. For the focus of this article, I would like to share with you the same powerful exercise, what my XLT students have named as "Mental Push-Ups."

In the nature of keeping things simple, I would say that this exercise in generating trading discipline focuses on two main areas. First, it is about controlling loss and being patient with waiting for entries and taking trades. Secondly, it is designed to maximize profits from the market and create a powerful overall risk to reward ratio in a trader's overall trading performance. Note the word control being used here. A consistent trader needs this in their makeup to even have a genuine shot at being successful. Even after quality education and mentorship, the novice trader needs to not only understand this dynamic, but to have actually experienced taking control and being disciplined at the same time. I have found with students I have worked with that after getting to grips with market direction and the use of stop losses, they still tend to suffer from a combination of over-trading, chasing the market when they are wrong or missed an entry and finally, not letting the profits run enough. This practical exercise can help to correct these fatal flaws in the psyche of the novice trader.

First, you need to define clearly your daily or weekly loss limit on the trading account. This could vary between 1 to 3% of your equity, depending on the style of trading and personal preferences. Let's, for example purposes, say we are going to have a maximum daily loss limit of $100. Now that this has been decided, the key is to not lose more than this – if you do, you have to quit for the day. Of course, you could wait patiently for a trade and it stops you out, but you still have to quit for the day. Close down the PC, shut the door to the office and walk away, even if that trade lasted mere minutes or seconds. It does not matter, you walk away. This is true discipline and any experienced trader reading this article right now will know just how hard it is to stop trading for the day after a single loss, but remember this is an exercise in control, nothing more nothing less. It is a rule which aims to prevent the trader from chasing back a losing trade, which typically leads to poor and emotional trading decisions and big losses for the day, when this could have been avoided by ceasing trading at the first loss. The object is to lose small and stay away from the market when you are wrong.

The second part of the exercise is quite simple. If that first trade is a winning trade, you have to carry on trading for the day. Now of course I am not suggesting jumping into new trades recklessly and playing up the winnings irresponsibly, but rather to carry on when you are doing well. Many market newbies pat themselves on the back when they make money and set daily profit targets. When they hit these targets, they stop trading, comfortable in the knowledge of their profits sitting there in the account. However, when they do this for a few days running and one day lose a trade, they get angry and take another to win back the lost money. When this course of action results in a further loss, what do they do? They trade again and the losses begin to mount up, eventually eating into the previous day's profits...sound familiar? So, instead of stopping when we are winning and carrying on trading when losing, I want you to flip this the other way around. Carry on when you are winning and stop when you lose. You should give yourself some guidelines for this as well.

I decided to carry on trading if my first trade was a winner, but I was only allowed to take two more trades in total, giving me a max potential of three winners for the day. This meant that at worst case, I could have one loser for the day, but at best three winners (please make sure that you are using at least a 3:1 reward to risk ratio to make this effective), meaning that I would be consistently looking to maintain higher average winners to average losers. But yes, there is one more tiny detail...if you win the first trade and take a second, you are still only allowed to risk your daily loss limit, which in this case is $100. Again, the aim is to maximize returns so that if you win first and lose the second, you will still be up for the day and protected for the next day, too. If you do lose the 2nd trade, a third is not allowed – you have to stop. Remember, you carry on when winning, but quit when you lose, making sure all along that you make the very most of the winners and cut the losers off sharply.

This was a simple exercise given to me by a great coach and I can honestly say, it turned out to be the psychological kick in the rear end I so needed! I learned the power of control, managing risk at all times and allowing my profits to run. I carried out the exercise for a month and it was hard at first, especially when I placed a loser and had to stop for the rest of the day. But in time I saw how my profits and performance increased to the plus side in a very short amount of time, all as a result of control and discipline. And I was spending less time at the computer screen, too, which is always a good thing. I hope it does the same for you. Finally, I would like to thank my good friend and mentor Guy Jacobs for his support along the journey