There is a saying among football coaches and wartime generals that theory is one thing and execution is another.
This has been especially true for the stock market this year, as it has been rocked by inflation, rising interest rates and Putin’s invasion of Ukraine.
Under such circumstances, it’s reasonable to expect execution missteps, according to real-money columnist James ‘Rev Shark’ Deporre.
“Let’s face it, you’re going to be unruly and break your trading rules quite often, but the problem is, you won’t admit it.” Deporre recently wrote on Real Money. “You will probably look for justifications as to why you did what you did. You can blame others for the problem or just bury your head in the sand and ignore it.
According to Rev Shark, rigorous discipline is extremely difficult, but if applied consistently over a very long period, positive results are much more likely.
So how can traders stay disciplined? Deporre offers four tips for nervous traders these days:
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1. Have very clear rules.
“Your rules don’t need to be very detailed,” Rev Shark said. “These can be general principles such as not letting draws go above a certain level or not buying stocks at lows, but you need to have clear principles to guide your trading, and it’s important to spell them out. .”
2. Review these rules regularly and incorporate them into your thinking.
“Your rules should be part of your methodology to such a degree that you automatically apply them without much thought,” he noted.
3. When you break a rule or are unruly, recognize that fact as soon as possible.
Review your trading daily and ask yourself if you are staying disciplined. “The simplest and most expensive mistake traders make is to simply ignore a stock that is not acting right because we are too lazy to discipline ourselves,” Deporre said. “It often feels like it’s too late to act and that leaves room for inertia.”
4. Start over.
You have the option to start over at any time. “Forget what happened in the past and focus on good discipline in the future,” he advised.
Traders are always on the lookout for new trading approaches and ideas.
“It’s an exciting part of trading, but staying disciplined and following our own rules is what will determine the end results more than anything else,” Deporre wrote.