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Let me provide a brief explanation of what discipline means in trading. The process of developing a trading system involves multiple steps, such as hypothesis testing, standardizing trading modules, back-testing, generating trading reports, and conducting live testing. Only after completing all of these steps can we have a reliable and practical trading system. Traders must strictly follow the signals generated by the trading system when executing trades. However, due to unforeseen factors, there may be a permissible error between the actual execution and the trading system signals. We consider the trader to have maintained discipline as long as the error is less than 5%. In other words, if a trader executes 100 trades and 95 of them align with the signals generated by the trading system, it demonstrates that the trader has enough discipline.
Discipline is a crucial trait for traders, but it is a subjective concept. There may be objective behavioral errors, which we collectively refer to as trading errors. Errors are objectively describable, such as clicking the wrong button on the mouse or misreading data. Trading errors are more challenging to control than discipline, making them a continuous challenge for traders. Some traders may not consider these details to have any significant impact on trading. However, my personal experience has taught me that the impact of/>