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Why discipline is crucial to your stock market strategy

by , 25 April 2014

Whatever your stock market strategy, without discipline you'll struggle to make it work. This is the case for both long-term investing and short-term trading. Discipline is one factor that makes a successful investor or trader. Let's take a closer look at why discipline is so important…

The role of discipline in your investing strategy

Discipline is a vital part of investing. It improves your chances of investment success.

Here are some reasons why discipline is so important, Gareth Stokes in Fear, Greed and the Stock Market explains:
  • Discipline will help you make time for investing. This includes keeping an eye on what’s happening in the stock market and checking how your investments are performing.
  • Discipline will also help you adhere to the stock market strategy you apply to your investing. You need to stick to the rules of this and discipline will help you do this. And keep your emotions out of the equation.
Why discipline is so important when you invest

Here’s an example that shows how vital discipline is to your stock market strategy…

Let’s say as part of your stock market strategy you decide to stay invested in shares using a trailing stop loss of 20%. Only once a share hits its trailing stop loss do you sell.

By using a trailing stop loss, you lock in any profits on the way up.

Let’s say you have a holding in retail share, Shop ABC. You’ve made a decent profit over the past couple of years.

You phone your broker about buying another share and you also discuss Shop ABC. Your broker is very negative about the prospects of the share so you decide to sell your holding. The share goes on to rise another 40% over the next year.

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A lack of discipline could cost you

This example shows you that by not having the discipline to stick to your own stock market strategy, you’ve lost out on some profit. You shouldn’t let the opinion of others sway you.

So there you have it, why discipline is crucial to your stock market strategy.

Why discipline is crucial to your stock market strategy
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