Accountability In Trading
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I recently heard from a trader who told me he has been having problems with
discipline in his day trading. He knows how to trade, he knows the setups he
needs to be looking for in the charts, when to enter, and when to exit. His
trouble is in having the discipline to wait for only those setups and not to
take half baked trades in the meantime.
This is a very common problem for traders, I imagine everyone goes through it
at some stage in their career. In working with student traders over the years, I
have noticed a phenomenon that I think explains one of the reasons for this lack
of discipline. When I watch student traders trade, they tend to sit very
patiently and explain to me what they are seeing on the chart in front of them.
When they see a valid setup come along, they can quite happily tell me what the
setup is and how they plan to trade it, and subsequently they will execute the
trade accordingly. When the same student is trading alone, they start taking all
sorts of off-plan trades, setups that arenít really setups at all. It seems
that the difference when trading alone, is that the trader suddenly has no
accountability. If they have someone looking over their shoulder keeping them in
check, everything is fine. They know that if they take an off-plan trade then
they will have to explain to me why they did so when it all goes horribly wrong.
Trading at home alone, the trader is accountable only to themself, and they are
probably not going to give themself the same hard time I would if they didnít
follow their trading plan to the letter!
So it seems that one of the benefits of trading for a living, that
independence from the boss, can actually be a hindrance at times. Short of
hiring a manager to stand watch over them, what can a trader do to overcome this
lack of accountability in their trading? One method I recommend is to give a
running commentary out loud throughout the trading session, as if talking to a
mentor. Explain what you are seeing on the chart, where you think a trade is
setting up and why, how you will enter, how you will manage the trade, and where
you will be exiting wherever the price subsequently goes. When talking out loud
you use a different part of the brain than when simply thinking to yourself, and
that can have surprising consequences; itís easy to talk yourself into a trade
that you want to take even though you know itís not quite right, but talk
through it out loud and youíll hear yourself making excuses and quickly see
the error you are about to commit. I know talking to yourself sounds a little
odd, but it really works.
Another option for making yourself more accountable for your trades is to
join a chat room. There are loads of them about, plenty of free ones as well as
some paid ones which call trades in real time (I wouldnít recommend those by
the way, they are often run by people front running their own calls). If you
find a decent room and commit yourself to calling your trades in real time,
knowing that you will have to explain to the room exactly why you just took that
really stupid trade will really make you think twice about taking it in the
These are two simple ways of making yourself more accountable for your trades
and therefore enforcing more discipline. There are many more interesting ways of
increasing discipline as a personal skill, and I hope this article will have
given you some ideas to start developing your own methods.
About the AuthorHarvey Walsh is a full time day trader and part time trading tutor.
He can be contact via his website www.day-trading-freedom.com
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Article Published/Sorted/Amended on Scopulus 2006-05-29 23:04:25 in Business Articles