One of the successful commodity futures trader out there, Linda Raschke, said this once:
"The most difficult task in speculation in not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success."
That's one of the reasons why the Trading Buddy System exists, to help each other learn the most important element in the equation of trading success: ourselves.
It's important to have market knowledge and experience the ups and downs that take place. It's important to know some fundamental and technical analysis. It's really important to define your edge, identify your expectancy and define and refine your rules. But, if we don't figure out what's going on inside our own brain, develop good habits and character, and maintain self-control when emotion starts to take over reasoning, then no matter how great your trading system, plan or edge is, you won't be as successful.
Ms. Raschke's spot on, in my opinion.
The question arises then: "How can I apply this?" Self control as it relates to trading could take many forms. You know you are exhibiting self control when:
1. You quit trading for the day when you've hit your loss limit.
2. You quit trading for the day when you've hit your daily targets.
3. You don't revenge trade when a trade goes against you, after you put in a ton of analysis.
4. You consistently take the same set-up trades, day in and day out.
5. You follow your trading rules, without exceptions. (Always trade with stops, proper position sizing, etc)
6. You don't "load up" when you "know" that a certain trade will work in your favor.
7. You don't hold on to losing trades longer than your trading rules allow.
8. You are more happy about following your plan than you are about the results.
There are definitely more out there, but you get the picture. Don't despair if you have trouble with these. Like any skill or ability, most take time to develop. Setting goals to do so, deliberate practice, measuring performance and accountability reporting will speed up that process.
This is one of the things the Trading Buddy System is helping us to develop.
Until next time, happy self-control trading!