Do You Have the Discipline to Trade for a Living?
By Cliff Clark
That's the question for the ages isn't it! In order to succeed in this business you are going to have to get an education. You are going to have to develop a trading plan that includes strategies and management techniques that you will have learned during your education. You will have to track your progress. You will have to keep track of expenses and anything else that it takes to run a business. Do you really think you are capable of running a trading business, of being an entrepreneur? That's exactly what you are when you run a trading business. Most who come into trading are not suited to this environment because they either have no discipline or have limited emotional control. But how can you tell you are ready to take on the challenge or whether you should explore other options that will save you a lot of time, money and aggravation?
For those of you, who think you are disciplined, consider the following questions. Take a very honest, serious, objective self-assessment and judge for yourself whether you think you have what it takes to make a living at trading.
Questions related to your current trading habits:
Do you chase stocks?
Do you try to hit "home runs?"
Do you over trade?
Do you have too many open positions?
Do you take excessive share size?
Do you switch time frames?
Questions related to your personality type:
Do you rationalize?
Do you become overconfident?
Do you become nervous when risking even small amounts of money.
Questions related to creating your trading business:
Can you create a plan for a trade and then objectively enter and manage it to conclusion, using the principles you learned in PTS or some other educational course?
Can you follow your trading plan?
Can you take your stop losses without hesitation?
Can you refrain from dollar counting?
Can you comfortably hold until your targets are hit as outlined in your trading plan.
If you answered “No” to most of the first group of questions you might be suitable to become a full time trader since you will be coming into trading with very few bad habits. If you answered “Yes” to some of them you'll probably need extra time to overcome these bad habits.
If you answered “No” to the three question in the second group of questions you might be suitable to become a full time trader since you won't be fighting your personality on a regular basis. People who try to rationalize all of their bad decisions have a hard time succeeding because they can't admit to making mistakes. Trading is all about making mistakes, we are going to make them on a daily basis. We have to learn from them and to move on. Being overconfident can also be a problem because it can cause you to over trade. To me over trading is one of the cardinal sins of trading and is the reason many aspiring traders fail. Having a fear of losing money will keep you in a perpetual state of stasis. It'll be hard for you to make decisions that have to be made quickly and you won't succeed.
The last group of questions relate to your ability to get your business setup and running. If you answered “Yes” to most of them you could be on your way to making it as a trader.
I hope you took the time to go through the questions and were honest with yourself. Reading a chart and finding a strategy is easy. Making a living from the strategies you find is not. Before you invest thousands of dollars in your education make sure you have the makeup to succeed in this business.
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
