The Trading Guide Part 6-Reviewing Daily Discipline

If you are new to trading, there are a few simple rules you can follow that will greatly increase the likelihood of surviving and succeeding. 

Our five rules so far have been:

1.  Your daily loss limit should be set at 5% of your account balance.

2.  You should stop trading for the day after losing 3 times in a row. 

3.  You should have a maximum of 3 open trades at any one time.

4.  You should set appropriate win and loss guardrails for individual trades. 

5. You should set a safe position size.

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Our sixth, and final, rule is that you should review your daily discipline. 

When you get to the end of your trading day, it is important to review how well you performed against your guardrails. A daily self-review of your performance  allows you to critique your ability to follow your discipline plan. It identifies the areas you are most disciplined, along with your problem areas.  It allows you to learn from your mistakes, and not fall into a pattern of bad behaviour. 

Here is a situation where the trader lost money today. How did this happen?

Many of his winners fell well short of his Profit Target and some of his losers closed below his Acceptable Loss.

To determine what went wrong, this trader reviews his day.

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Straight away, we see a low discipline score for the day of 40%. The majority of his trades today broke his guardrails. Some were executed when this trader had broken his Open Trades rule, and there were already 3 or more open positions when he traded. Other trades were executed and allowed to lose more than the acceptable loss for this trader and further to this, he closed trades after a losing streak, costing him more of his account. The only rule he stuck too was staying within his daily loss limit.

By reviewing his own trading day, this trader can clearly see the correlation between undisciplined trades and losing money, and can also identify where his weak areas were today.

Reviewing all your trades at the end of the day will help you learn from mistakes, and also learn from the really positive trades.


Tracking the disciplined trades versus the undisciplined trades will help you find patterns of behaviour that are personal to you.


If you are consistently breaking one of your rules, a daily practice of review will help you to acknowledge this and improve it. 


To recap, you should always review your trading discipline daily to ensure: 

 

  • That you maintain your Daily Guardrails

  • That you maintain your Trade Guardrails.

  •  That you understand the cost of Undisciplined Trading.

Marise Gaughan