With all the learning material and vast amounts of knowledge readily available on the internet, learning how to trade and what to do in every possible situation seems more possible than ever. There is one major problem: knowing what to do and actually doing it is not as easy as it seems.
Following a logical, well thought out trading plan on paper is quite simple when there is no pressure. The reality of trading is very different: stakes are high, the markets move quickly and often irrational for long periods of time, with traders experiencing build-ups of frustration, anger and disappointment. Very often these factors lead to incredibly self-destructive automatic fear and greed reactions. When these reactions appear, the willpower to follow the initial plan disappears.
How often have you found yourself dissatisfied by your own reactions when all was done and the dust settled? New traders wake up from the haze only after a margin call liquidates their bad positions. Even experienced traders, with years of experience under their belt, often hold on to losing trades for far too long. The initial trading plan clearly indicated otherwise, yet nobody followed the indications. Most times, the problem is the lack of willpower to make the right choice.
To address this issue, we must first understand that willpower is like a muscle. Using this muscle strengthens it, laziness weakens it. There is no easy way to strengthen willpower other than using it in all aspects of your daily life. Half measures do not work! Being disciplined during trading hours and then switching to a careless procrastinator in your free time will lead to internal conflicts. Those battles are eventually won by the bad behavior.
Secondly, willpower requires a lot of energy. A good practice for independent traders should be to avoid trading altogether when they are sick or worn out by other activities. The energy we have in any single day is a finite resource, therefore we must manage it carefully. Eating properly, regular sleep hours and working out are all healthy habits that increase our levels of energy. Avoid heavy multitasking, arguing with other people and fighting with yourself over unnecessary decisions to save up your energy.
A common misconception that has strong ties to willpower is that quitting is somehow the easy way out. When losing, taking a short break and a step back to see the larger picture is something most traders aren’t capable of doing. Pushing to work even longer hours while lacking the willpower to make the correct decisions is a bad habit in the business of trading. Stopping when energy levels are not optimal and willpower is depleted doesn’t seem like a profitable behavior, since you can’t make money when you’re not in a trade. Instead, this paradigm shift will save you money by keeping you out of the market when you’re about to make bad decisions.