The succcessful stocks trader is the disciplined trader. Discipline means controlling impulses and controlling emotions. As many new stocks traders can tell you, however, maintaining discipline is often easier said than done. Just as the vast majority of stock market participants are driven by fear and greed, many new stocks traders find it difficult to avoid succumbing to self-doubt and panic.
We are trend followers and our "edge" to profiting in the stock markets is called trend timing. Trend timing is challenging in that we often take positions "against" the prevailing sentiment of the majority of traders.
Stock Markets Are Chaotic
The stock markets are chaotic and unpredictable. The current volatility being a perfect example. When faced with an uncertain set of circumstances, it is easy to see why market timers may, at times, feel unsure and unsettled.
Timers follow strategies that provide entry and exit signals based on plans designed to be profitable over time, and that will also protect their capital. But no timer can know with certainty how any "one" buy or sell decision will play out. Some trend timers thrive on the excitement, but many find it disconcerting.
The best way to combat feelings of uncertainty is simply by following a trading plan or a stock trading system. If one trades with a detailed trading plan, he or she will impose structure onto an unstructured reality.
The stock markets may seem at times like a mass of confusion, but you can address it by following a strategy that actually uses the volatility of the markets to generate timing decisions.
The more structure you have to follow, the less uncertain and unorganized you'll feel. You will know what to do and when to do it. One's mood and attitude is another factor that impacts the ability to maintain discipline. An optimistic yet realistic attitude is vital to maintain market timing success.
Because market timing often places you at odds with the current market sentiment, it is understandably hard to feel optimistic when your position is at odds with the majority.
Emotions And Decision Making
Maintaining discipline is vital for trend timing success. It can be extremely difficult at times, especially in sideways (non-trending) markets. The best way to be disciplined is to stick to your timing strategy and keep your emotions and impulses under control. Only by maintaining discipline can you realize long term success timing the stock markets.
Remember that all stock trading strategies require discipline. Not just trend timers. It is the one crucial element between successful stock traders and unsuccessful ones.
