A Trader Journal

When traders lose money, they often attribute the problem to a lapse in discipline. Then often the next step is negative self-talk, self-criticism followed by resolutions to stop this with will power and self-control.

I think not all discipline problems are necessarily due to psychology. Many times the loss of discipline can be due to other problems in trading. I think having an understanding of what caused (trigger) the lapse in our discipline coupled with self-control is more effective than trying to resolve by just will power alone.

Following are the top 10 reasons:

1. Environmental distractions and boredom cause a lack of focus;
2. Fatigue and mental overload create a loss of concentration;
3. Overconfidence following a string of successes;
4. Unwillingness to accept losses, leading to alterations of trade plans after the trade has gone into the red;
5. Loss of confidence in one's trading plan/strategy because it has not been adequately tested and battle-tested;
6. Personality traits that lead to impulsiveness and low frustration tolerance in stressful situations;
7. Situational performance pressures, such as trading slumps and increased personal expenses, that change how traders trade (putting P/L ahead of making good trades);
8. Trading positions that are excessive for the account size, created exaggerated P/L swings and emotional reactions;
9. Not having a clearly defined trading plan/strategy in the first place;
10. Trading a time frame, style, or market that does not match your talents, skills, risk tolerance, and personality.

Credits: The source for the post is from this article by Dr Brett Steenbarger.

It is not the trading that's hard, it is the discipline!