Discipline

Discipline is the ability to get things done over a long period of time. Not only does it encompass the will to do the hard things, the uncomfortable things and the awkward things – it is the ability to create an environment which makes that easier.

People who are highly disciplined have some common characteristics that allow them to be disciplined:

  • They are highly motivated to achieve a goal.
  • They are experienced or humble enough to recognise that things will go wrong.
  • They are specific.

Being highly motivated to achieve a goal gives the confidence to say no to tasks or requests which are not core to that goal. This creates time and space to put more effort into achieving the one goal. If you’re studying 6 hours a day instead of 3 hours then you would expect to do better in a test.

Being humble or having learnt through experience that something takes longer to complete than expected is just acknowledging that things go wrong. The result is telling you things went wrong.

Most successful people I’ve met know this and anticipate things will go wrong, indeed they expect it . The difference is, because they expect it, they plan for it. They also recognise how fallible their own estimation is.

Smart people realise dumb people don’t allow extra time for things to go wrong.

I specifically make this comparison because everyone likes to think they’re smart. In order to change your behaviour you need to be attracted to your new behaviour and repulsed by your old behaviour.

If you feel smart then you’ll allow more time and feel confident telling people that’s what smart people do. This reinforces the change.

Small social and mental techniques like this help transform your behaviour to create your success. This is what people mean when they say success requires commitment – commitment to make any changes and all changes that increase their chance of success. A typical behaviour of unsuccessful people is pointing out why something won’t work even though it is recommended by a successful person. The resulting success has less to do with whether that individual activity was meaningful than the fact that you tried it according to how it was supposed to be done and it didn’t work. The classic trading example is collating statistics on your performance discussed in more detail here or keeping a trading journal.

Being specific means the difference between “my goal is to get rich” and “I want to get rich through trading”. The only way you want to get rich is through trading. If another opportunity to get rich came up, you would say no. You need to think about this because if you keep on saying yes to other opportunities, it’s taking time away from trading. It’s just about being honest, because investing in other forms of wealth creation takes time. You need to invest time as well as money in these other activities.

Most people are attracted to trading because there’s a low cost to entry, you can make big money and it’s not location dependent. How realistic these assumptions are is discussed here.

If you specifically choose trading to get rich then you need to say no to other opportunities. This creates time and confidence to devote more success, brainpower and hard work to trading.

It means saying no to other money making schemes, actively investing in property, shares, mutual funds, Bitcoin, time-share pyramid schemes etc etc. It doesn’t mean you can’t invest, it means being passive with these activities. Hiring a property manager, putting money in an index mutual fund are all different ways to “buy more time”. “Buy” because you have to pay someone to manage it.

This extra time you’re going to devote to trading. This is going to help you succeed.

What’s next?

Once you’ve created the time to succeed, you need to build the confidence to act only when it’s best for you. This confidence comes from knowing what’s likely to happen and what’s unusual. It’s the difference between an adult and a child.

A child has the wonder that anything can happen, an adult knows one or two outcomes are very likely and the remainder are very unlikely. This allows an adult to avoid certain situations without feeling much anxiety.

When we start trading we are like a child, with the wonder that anything is possible.

You may have witnessed the confidence which manifests as total disinterest when a younger guy excitedly talks about this great trade set up or some opportunity and the older person just has a blank face or replies with some obscure comment.

One of the best examples is in Reminiscence of a Stock Operator where old man Partridge listens carefully, thanks the person for their tip and ignores the ‘opportunity’. Either through experience or observation he has learnt that his chances of making money from this type of opportunity are poor and that HE will make the most money by sticking to his strategy.

He is demonstrating many of the qualities listed above – he is specific, he is humble and he most definitely knows things can go wrong.

In the story the main character Jesse Livermore does not realise the wisdom of old man Partridge’s words until later in the book, when it becomes something of a lightning bolt for him. He had become quite good at picking short term market direction and is one of the best known day traders from that time.

He gets to a level of success in the book that most people don’t experience (he was moving the market and losing because of it) but it forces him to change his trading style so he can put through a lot more size.

When he transitions a trading intraday in one stock to trading the broader market through the business cycle, it’s initially a failure.

He traded the same way but gets cleaned out so has to go and save up some money again. He embodies being specific in his goals. He does not try his hand at anything else, he just works until he’s got a trading stake and then starts trading again. He has chosen to be successful in trading.

At this point he probably would have benefited from doing some backtesting or collecting some statistics on his new approach, which is exactly what we’re discussing here. He acknowledged early in the book he always needed to test his ideas with real money. I think this is something a lot of traders can relate to. It’s also another reason I think that trading a dummy account can be a poor indicator of how you will go.

Some people will just not pay attention until something real is being risked. I fall into this category, hence why I have devised ways to deal with it. Why do people react differently to paper accounts and real money (‘live’) accounts? Click here to read more.

That is why a trading coach is valuable, they give you the chance to get started much sooner whilst at the same time offering a chance to reflect and put some balance back into your analysis. They allow you to reflect, parse and prioritise your alternatives.

Most importantly they give you another chance to interrupt your behaviour and reduce the damage you do to your account until you make the changes to become successful. In essence they are a defensive coach for your money.