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Discipline, know thyself

behavioural finance, money management, risk management, position size, ebook money management

behavioural finance, money management, risk management, position size, ebook money managementIf you want to become a profitable trader, just know that: "no profession requires more hard work, intelligence, patience and mental discipline than successful speculation". This famous sentence is not mine, but by Robert Rhea, that said it in 1932.

We are traders but, before that, we are humans. I often read that trading consists of 20% of knowledge and 80% of discipline. I do not know if these percentages are really accurate, but I know it is very difficult to manage our emotions.

Discipline is an important aspect of trading. We have to know ourselves, our weaknesses and then we work on it. A trading plan is important but if then we do not follow it to the letter, will be totally useless.

Self-discipline is able to influence incredibly market approach: a trader, highly arranged and at the same time undisciplined will hardly keep his earnings, despite the technical knowledge is on his side. Controlling your ego is very good key, especially if you are coming from a period of profits. About the ego, Albert Einstein created an equation: "Ego=1/Knowledge. More the knowledge lesser the ego, lesser the knowledge more the ego".

It is extremely important to learn to recognize our mistakes and exit to the trade as soon as you understand that the road taken is the wrong one. Many traders lose part of the savings because they "marry" an idea and they continue even in the event of adverse or changed conditions. On Wall Street, there is an old and famous saying: "trade what you see not what you think".

If you want to become a profitable trader, know yourself and work on your weaknesses!

 

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