Discipline Trader

I believe we are evolved to be bad traders(if we define bad as undisciplined). Greed instinctively veer us towards buying when stocks are high and fear induces us to sell when stocks are low. We remove stop loss when the market price is closing in and we remove our sell queue when our target price is near. In its essence, denying preceding rational decision when it comes to crunch time.

We sometimes buy stocks with confirmation biasness, believing so strongly in it that we refuse to give in to market forces. Even though we logically know that the stock market will only shift momentum when a collective group decides. Our individual opinions will always be dwarfed by the collective group, but we sometimes deny this fact, because of "hope".

With that being said, this doesn't mean that undisciplined traders always loss money. It means that they don't stick to their initial plan and hence will not be consistent. Who says buying the highs will not go higher? Who says selling the lows will not go lower? The stock market does not abide by consistent causal laws and many a times yield a different outcome from similar situations.

Previously, I wrote an article about whether our stock market is deterministic or not here. I have gradually come to accept the plausibility of a chaotic market. If brain states are abided by Chaos Theory, then the stock market, which is a market driven by brain states, should also be chaotic in nature. Short term predictability cannot be assumed, as if we do not know all the initial conditions of a complex system, we cannot hope to determine the ultimate fate of it.

Being a discipline trader in a non linear market however has a distinct advantage. Although you can prevent a right from going very right, more importantly you can also prevent a wrong from going very wrong(very dangerous). A non consistent trader will not be able to do efficient risk management.

A discipline trader can use back test programs to find a trading routine that he/she is comfortable with to follow. An undiscipline trader frequently gets dragged along by his/her emotions.

So in my opinion, choose to be discipline not because you can make more money, but rather because you prefer a more managable and predictable routine.