Key to Stock Trading

If I was to pick one thing that would lead to your success as a trader, I would without a question land on the subject of discipline.  I am going to make a very bold statement.  I believe that if you are disciplined then you can make money trading virtually any system that exists.

Discipline is what sets a good trader apart from a great trader.  It will determine whether you succeed or fail.  With the recent decline in the market many people have the ability to lose a lot of money if they are not disciplined and stick to their system.  In this market, if you are betting that a stock will come back then you just may be out of luck.

I live in the Chicago area and recently we had a very had story where a 20 year veteran of trading took his life due to the large losses that he had racked up.  Now I am not familiar with the individual nor his circumstances but it would be my guess that he violated many of his trading rules and was not disciplined.  As a result, his losses continued to pile up.

If you want to make money as a trader then I would suggest that you spend more time on this subject than any other.  It will make or break you.  However, I believe it is the most overlooked aspect of trading.  We spend more time talking about how to pick the stock and how to exit the trade.  Now don’t get me wrong, those things are extremely important but unless you have the discipline to follow your rules the rules themselves are meaningless.

There are hundreds of books in existence on trading and very few deal with this topic.  I have run across one that I highly recommend that you pick up.  It is called Trading in the Zone : Maximizing Performance with Focus and Discipline. It is written by Ari Kiev.  For a little more than a round trip trade you can pick up the book.  I think it is a must to understand this topic before ever engaging in active trading.  Pick it up; you will be glad you did.