Do you make the same mistakes over and over again and don’t know why? Did you get stubborn and not cut the loss when you were supposed to? Did you take profits early because you were afraid of the trade turning into a loser? Got scared and stop out prematurely for the 5th time this week?
In trading you have to make a lot of important decisions under pressure. If you don’t have the correct trading habits, you will not consistently be able to make the correct decisions with your money. Self improvement is not optional for successful traders.
In order to understand how to change habits, you have to understand the process of habit formation, and know what patterns of behaviour to replace them with. Make 2019 the year where you make it your goal to create winning trading habits and destroy losing ones.
We Are Inherently Bad At Trading
Despite what it may seem like on the internet, no one became a consistently profitable trader overnight. Everything we were taught about how to succeed in the world when we were growing up does not apply to trading. In order to become a successful trader, you have to strive to reprogram your mind and develop new habits in order to succeed.
Who you are when you start out as a new trader is nowhere near disciplined or skilled enough to become a consistently profitable trader. Habit reformation is not optional in this game. This process starts with changing your belief systems.
Changing Belief Systems
One of the first steps to changing habits is accepting winning belief systems, and eliminating losing ones. Let’s start by identifying the most common losing belief systems that holds traders back:
Losing belief systems:
- The market owes me money today because I showed up to the computer
- Everyone else is buying, so it’s safe for me to buy
- It’s not a loss until you sell
- The market is rigged
- I need to make back the money I just lost
- I’m a terrible trader because I lost on a trade
- I’m a successful trader because I put on a winning trade
Winning belief systems
- The market owes me nothing, I need to prepare to earn my days pay
- The crowd is usually wrong, I’m skeptical of the consensus opinion
- Taking small losses is necessary for profitable trading
- The loss was my fault, not anyone else’s
- Wins and losses are randomly distributed, one win or loss doesn’t define you
- No worthwhile result in life comes easy
The overall theme is that winning traders accept responsibility for all their trading outcomes, and you have sacrifice short term pleasure for long term success. In trading (and in life), the more responsibility you take for your outcomes, the more you can control and improve them.
Habit Changes Take Time
Studies show that it takes on average 66 days before a new behavior becomes automatic. Once you decide to work on eliminating your bad habit of not being able to cut losses, you will not wake up tomorrow with the problem resolved. You need to have mentors who have dealt with and conquered these bad habits, and create routines for yourself to actively combat these issues.
For this particular bad habit, we recommend traders set a 5 cent stop loss for your next 30 trades. What’s going to happen, is that you’re probably going to get stopped out 30 times. You will get so used to taking a small loss, that it will start to become a habit. You will get used to getting taken out of the market with a hard stop, and you will not feel the urge to fight the market. It is a small price to pay in the short term to eliminate a habit that could make it impossible for you to become a profitable trader in the long run.
Be The Minority Who Actually Achieve Their Goals
Habit reformation is a difficult process, which most fail at. If this was easy, everyone would be rich and successful. Most of the people who will set New Year’s resolutions this weekend will give up by February. But if you understand that nothing worthwhile is an overnight process, you can ride through the bumps in the road knowing that your end goal will give you a better life.
Free Trading Assessment
If there are other bad trading habits you need help with, fill out our free trader assessment here and we will go through all of your trading issues in detail. Don’t procrastinate on your success. Make 2019 the year where hit and exceed all of your trading goals.