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First post in the forum. Got a problem that may have been asked a million times - if so, pardon the question. :-p
I am in the process of developing a setup ... the real issue is, if I have a setup that I can be disciplined with, I should be able to - at least become somewhat profitable.
However, in reality is that if my setup is changing / tweaking, I cannot be disciplined with it. So with no discipline, how can I tweak the setup in the right direction?
Looks like it is going to be a setup first ...
Which come first? Discipline or setup?
Can you help answer these questions from other members on NexusFi?
I am saying that most traders attempt to define a setup in very precise terms. This is why so many end up trying to automate it, they view the market through the eyes of this "black/white" and "true/false" universe for signals.
If you believe this applies to your setup, then you can learn about discipline in one form by trading to trade it and stick to your predefined rules.
I don't believe in this approach. Doesn't work for me. I need discretion. I need my brain to do more than identify up/down colors and above/below zero line indicator panels. And so, a strict rules based "setup" does not apply to me.
Instead I am much more fluid, more dynamic, relying more on my feelings of the market than I do on any kind of hard/fast setup or rule. My setup is defined more by looking for areas of support, resistance, strength and weakness than it is by looking for anything that can be written down in static terms or programmed into a simple trading strategy.
Going back to your original question about discipline, most people make money on sim very easily. Most people lose money on cash. The difference is just one (of many) types of disciplinary changes between the two. The market is the same. You can set your simulator to only fill you if price penetrates the level, so the simulator is real. The difference is all you.
So if you are constantly changing or tweaking your method, it is probably because:
a) Your method makes no sense
b) You have no confidence in your method because you've not forward tested it
c) Your method has no edge
d) You think your method is mechanical, but it isn't
e) Your method is impossible to execute on
Or -- if none of the above apply, then probably one of these do:
f) You are trading with scared money, or money you cannot afford to lose
g) You are under a lot of pressure to perform
You can find hundreds more posts from me on my feelings on this kind of stuff here:
I'm creating this thread with the purpose of a 'catch all' for any trading related question that futures.io (formerly BMT) members want to ask, but don't want to create a new thread for -- or find an existing thread to reply to.
I agree with points a through g, but let me present the counterpoint to discipline and discretion. I believe they are different things, and are not mutually exclusive. If you have a problem with discipline, then you need rules, just applying discretion will not solve your issues, that will just cause the non-disciplined trader to run amuck.
Discretion is an interesting thing. Many seasoned discretionary traders have developed a certain feel for the markets that has become 2nd nature to them. This feels simple and natural to them, but in most cases took many thousands of screen hours to develop. If a person cannot succinctly explain their trading process to you, then don't try to trade like them. You may follow the concept they are trading, but that discretion, or feel, will have to be your own and acquired over many hours of playing with that trading concept.
I have always had an issue with discipline, and I still do after many years of trading. That is why I manually trade a very mechanical method with strict rules. I have been trading the same method for years. For the first year, I lost money with this method which proved itself in backtesting, because I thought I could do better then the backtesting by applying my discretion to it. Wrong! for me, it turned a winning method into a loser.
My particular discipline issues involved managing trades. What I had to do to enforce discipline was to actually leave the room once I entered a trade and allow my ATM to manage the trade as it had been traded in backtesting. Otherwise I would fiddle with the trade and cause myself a loser, or a less then optimal winner. So, I would initiate the trade, walk out of the room, and not come back to the computer until I heard "target filled' or 'stop filled'
So, I believe, if you are newbie, or if you have discipline issues or both, think very hard about applying discretion, and give yourself plenty of time to develop that discretion, if you have been convinced to go that route.
To break it short - discipline and moneymanagement are tightly correlated.
My suggestion to not overtrade is to put first some red lights into the
personal trading plan like
a) a maximum trade number per day (to force you to wait for your setup coming)
b) to stop for a day after x minus trades in a row
c) to stay out of the market if last day a maximum drawdown of y% was hit
etc.
As long as you follow your trading plan by word - these proposals can help
to stay in the game - if not:
You do NOT need a trading plan (as lack of discipline showed up on first view).
The original question was 'Which comes first, discipline or setup'? Well, realize that if you have a crappy setup, or a crappy method, then all the discipline in the world will not help you. So, obviously the answer is setup comes first. Discipline only helps traders with a good method, but the trader's own psychology prevents him/her from allowing that method to work as designed.
