Discipline
Risk & psychologyFollowing written rules when you would rather not.
In plain terms
Finite, and it gets tested monthly. Automation beats it because it removes the decision entirely.
1492 terms
Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
Showing 11 terms
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Process discipline
Risk & psychologyApplying the same sequence of checks to every decision, including the ones you are already excited about.
In plain terms
Ticking boxes quickly to reach a decision you had already made is worse than no checklist, because it manufactures the feeling of diligence. If yours has never stopped you buying something, it is decoration.
Sell discipline
Risk & psychologyA written set of conditions, decided before purchase, that determine when a holding is exited.
In plain terms
Written while calm and with nothing at stake, selling becomes the checking of a condition rather than a decision made under pressure.
Ego depletion
Risk & psychologyThe idea that self-control draws on a limited resource, so discipline weakens across a long sequence of demanding decisions.
In plain terms
The experimental evidence is contested, but the practical implication stands without it: a rule decided in advance needs no willpower at the moment willpower is scarcest.
Risk creep
Risk & psychologyThe gradual loosening of risk discipline during a successful run.
In plain terms
Each step is individually reasonable and rewarded at the time, which is what makes it hard to interrupt.
Bracket order
Trading & ordersAn entry order with a stop-loss and target attached.
In plain terms
Enforces intraday discipline at the cost of flexibility; squared off automatically.
Efficient market
Technical analysisThe claim that prices already reflect available information, so no repeatable pattern in past prices can be exploited.
In plain terms
The strongest objection to technical analysis, and it holds in part: simple published systems do decay once everyone can see them. What does not get arbitraged away is the discipline to follow a rule consistently.
Income smoothing
Market basicsConverting an irregular inflow into a steady outflow by paying yourself a fixed amount.
In plain terms
The whole discipline of self-employed finance. The household never experiences the variation, so ordinary budgeting works again.
Industry consolidation
Fundamental analysisA fall in the number of participants in an industry as capacity is retired, acquired or resolved through insolvency, leaving the survivors facing less competition.
In plain terms
The tell that it is actually working is that realisations stop falling before volumes recover — price discipline needs only a decision, demand needs a cycle.
Mr Market
Fundamental analysisBenjamin Graham's device for the market: a business partner who each morning names a price at which he will buy your half or sell you his, and takes no offence when ignored.
In plain terms
He is there to offer prices, not to tell you what the business is worth. The whole discipline is knowing roughly what it is worth and transacting only when his number is clearly wrong in your favour.
Resulting
Risk & psychologyJudging the quality of a decision by how it turned out rather than by the reasoning available when it was made.
In plain terms
The dangerous box is not the sound decision that lost — it is the rule violation that paid, because indiscipline has just been reinforced with money.