The 7 Disciplines of Stock Market Investing and Trading
© Bill Wheeldin 2009 – http://www.trading-index.com
Whether you’re a beginner to stock market investing, a seasoned speculator used to investing
online or an advanced trader with a tried and tested trading system, it is crucial that you have
an understanding of what I call the 7 Disciplines of Stock Market Investing.
The 7 Disciplines will help you to focus and organize your investing education and make sure
that you don’t overlook any area that may affect your trading success and profits.
To help organize your resources I’ve created a mind map called Trading Index, which covers
the 7 Disciplines as well as numerous other topics relating to trading and investing. It allows
you to categorize all your digital sources of information and store them on your PC for easy
Trading Index is free to download from http://www.trading-index.com
Here is a brief overview of the 7 Disciplines together with links to useful online trading and
You may not even think of your stock market investing or trading as a business but I think it is
useful to have at least some idea of what you want out of it and how much time you are willing
to devote to it.
Do you see investing as a way to grow your capital to await you in retirement or do you need
income from dividends or bonds? Or do you wish to trade stocks more frequently to produce
income so that you can reduce your hours at work?
A useful article on trading as a business can be found on the Elite Trader forum at:
http://www.trading-index.com/business and one of the best books on trading for a living by
Dr. Alexander Elder can be found at: http://www.trading-index.com/businessbk
Looking after the admin side of investing, e.g. PC backups, trading logs, portfolio management
and accounting, is often thought of as boring and taking up time that could be spent trading
Unfortunately, if you’re serious about investing then keeping secure backups and details of
your trades is essential and if you’re successful then you’ll need accurate records for when the
taxman comes knocking! Quick and easy backup software can be found at:
Also, if you’re a member of many investing sites then you’ll need a way to securely keep track
of all your passwords. I’ve found Roboform to be an excellent way to automate this task and a
trial download can be found at: http;//www.trading-index.com/admin
Fundamental analysis is the gathering of information on the finances, products and potential
profits of a company you are thinking of investing in. It can take many forms from the reading
of annual reports and attending AGMs to simply walking down the High Street and seeing
which shops seem to be busiest.
Fundamental analysis is more relevant to investors that plan to hold their stocks for the
longer term and the idea is that they hold companies that have some sort of intrinsic value so
that the stock price will rise over time.
An educational article introducing fundamental analysis can be found on the Investopedia site
at: http://www.trading-index.com/fundamental and a good book on getting started in
fundamental analysis can be found at: http://www.trading-index.com/fundamentalbk
Technical analysis is the study of stock price movements, which is usually done with the help
of some sort of graph or chart. This shows the fluctuations of the stock price over time and
can help traders to time the purchase and sale of a stock.
As you may expect, this sort of analysis is usually performed by traders who only hold their
stocks for short periods of time, sometimes only seconds, before selling. An in-depth analysis
of stock price movements can help traders to develop profitable trading systems, sometimes
even to the point of automating the purchase and sale of stocks to eliminate the human factors
that make trading such a difficult task to master.
Another article on the Investopedia site introduces technical analysis: http://www.trading-
index.com/technical and an excellent introductory book can be found at: http://www.trading-
Money management is a vital discipline that needs to be mastered if you intend trading or
investing for very long. Without it you will soon find that your capital is eroded with the
inevitable losses you will face as a trader.
Money management involves assessing the risk of loss before you enter a trade and managing
the trade once you are in it. This includes knowing where to place your stops and having a
plan in place to take profits as your trade moves in your favour. All these factors can be
combined into a trading system, which all successful traders develop in order to maintain
discipline and help them to pull the trigger.
A useful article on money management can be found at: http://www.trading-
index.com/money and a book on developing a money management system can be found at:
This brings me to the next discipline, trading strategy. A trading strategy brings together most
of the elements I have discussed so far, into a system that identifies what you will trade or
invest in, what timeframe you will trade over, how much you will risk on a trade and it will
include rules for entering and exiting trades once profit targets are reached or stops hit.
A trading strategy can be developed over years of trial and error and include years of trading
and investing experience or it can be bought on the internet for $47.00. It’s your choice.
However, one thing is clear – a trading strategy is not static; it changes over time as the
markets change and as you as an investor or trader change your outlook and risk tolerance.
An introduction to developing trading strategies can be found at: http://www.trading-
index.com/tradingstrat and an encyclopedia of trading strategies at: http://www.trading-
The final discipline is psychology, but just because I have put it at the end doesn’t mean that
it’s the least important. Quite the contrary, since I feel that the most important element in
whether you will be a successful trader or not is you.
Have you got the motivation to educate yourself for the months or years it may take to
become successful? Have you got the discipline to develop and refine trading systems to give
you the best return with the lowest risk? Have you got the courage to pull the trigger and
enter trades once all the factors are in your favour?
For an extremely successful program that will help to strengthen your psychological make-up
for trading visit: http://www.trading-index.com/psychology and for a book on improving
your trading performance visit: http://www.trading-index.com/psychologybk
Remember, the 7 Disciplines are there as a framework for your investing education and cover
most of the topics you will encounter in your early years as a trader. Make sure that you
consider all the disciplines and you’ll have a solid platform to build on.
Trading Index helps you to store all your investing resources and includes the 7 Disciplines as
well as numerous other topics. It is free to download and includes links to many other online
sources of investing information and tools.
Download Trading Index today from: http://www.trading-index.com
© Bill Wheeldin 2009 – http://www.trading-index.com