Bad habits can be the biggest enemies of an up-and-coming trader.
If you do the wrong thing and get lucky, you might experience misplaced positive reinforcement, causing you to think a bad habit is a good one.
And while unlearning bad habits can be challenging, it’s certainly not impossible…
Here are a few simple strategies I’ve learned over the years that can potentially help to eliminate your bad habits:
Identify the habit: The first step to unlearning a bad habit is to identify what it is. Take some time to reflect on your recent trading performance. Do your best to pinpoint the habit that is holding you back.
Understand the habit: If you don’t understand your bad habits, you’ll never break them. Once you’ve identified the habit, try to understand why you do it. Is it a response to stress or anxiety? Does it provide a sense of comfort or familiarity?
Replace the habit: It’s difficult to overcome a bad habit without replacing it with something else. I suggest identifying a positive change in your trading that you can substitute for your bad habit.
Today, I’ll break down three of the most common bad habits I see in my students. Then, I’ll show you how to remove them from your trading for good.
Bad Habit #1: Focusing on Short-Term Gains
While I’ll admit that trading is mostly a short-term game, that doesn’t mean you should only strive for short-term gains.
This is especially true for day traders…
Focusing on short-term gains can lead you to take on too much risk, or make impulsive trades that don’t align with your long-term goals.
Even if you’re purely day trading, you should keep your long-term goals in mind when making any major decisions.
Don’t try to win on every trade. You’ve gotta see the forest through the trees.
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Ask yourself…
- Am I making this trade to bag some quick gains, or to build my account?
- Does this play fit my long-term strategy?
- How will I justify this decision if the trade goes south?
You should be able to answer these questions honestly before pulling the trigger on a setup.
Bagging a quick win on a sketchy play can be satisfying, but it can also lead you down a path of bad habits.
Plus, worrying about short-term gains can create a domino effect, potentially leading you to the next bad habit…
Bad Habit #2: Chasing Performance
Some traders only care about their profit and loss (PnL)…
In other words, they chase performance over building a solid strategy, finding consistency, and eventually, achieving mastery.
This bad habit is closely related to focusing on short-term gains, except those who chase performance care only about their overall % gained or money earned.
Traders who chase performance often try to scalp ultra-volatile stocks or follow the latest trend, hopping from play to play with zero risk management.
But by doing so, you’re far more likely to end up going long on an overextended chart that’s moments away from total destruction…
This can lead to buying high and selling low, as well as missing out on potential opportunities that aren’t being shilled on social media every 20 minutes.
Chasing performance can cause you to make impulsive trades, ignore your rules, and forget your overall trading plan.
So, instead of worrying about your PnL … focus on finding setups that work for you and building a consistent, long-term strategy.
If you can do that, your results will likely improve without the need to chase your performance.
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Bad Habit #3: Negative Self-Talk
Self-evaluation is a critical skill that every aspiring trader must harness to their advantage.
However, not all self-evaluation is created equal. You can easily psych yourself out by approaching it the wrong way.
When evaluating your trading performance, you need to be honest with yourself.
Identify the trends in your wins … and even more importantly, in your losses.
Over time you’ll get a better understanding of how different factors affect the ultimate outcomes of your trading decisions.
But what I don’t like to hear from my students is negative self-talk.
When you’re not trading your best … don’t let yourself entirely off the hook, but don’t beat yourself up either.
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If you’re too hard on yourself, you run the risk of damaging your confidence.
The best traders I know have a strong work ethic, forward drive, and ability to productively self-reflect…
They’re skilled at looking back on their trading and removing the mistakes that led to losses.
By doing so, they can identify their bad habits and eliminate them for good.
And now, it’s time for you to do the same.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
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