While enjoying a weekend round of golf this month, I happened to notice one of my playing partners issuing himself (out loud, mind you) little reminders, often one after the other, while preparing to hit shots. “Keep your head still,” he’d say, followed by “Keep your left arm straight,” “Then follow through,” “Don’t swing too hard,” “Oh, and remember your tempo!”
I noticed, of course, and with this kind of awkward procession happening before most shots, I had plenty of time myself to relate this to all the, shall we say, unique, trading habits I’ve seen over the years, too.
This little example goes to show that we humans ask a lot of ourselves, whether it’s in the markets or our endeavours outside of them. In this case, my golf partner was trying to be so many different things all at once that it became even harder to just play the game! And, I wonder whether you’ve ever done something similar with regard to your trading?
In any case, the point is this: Of all the qualities we may think we have to embody with each trading day, there’s really only a few trading habits that matter. Here are five (5) trading habits that we should be concerned with, and anything else, well, might just be overkill.
It’s often said that good traders “Do their homework,” and while I’ll be the last to suggest spending any late nights and early mornings pouring over charts, economic news and data, and various patterns of all shapes and sizes, it’s a worthwhile trading habit to have a well-defined purpose coming into each trading day. In part, that includes isolating key markets, time frames, and patterns that you’re more likely to trade.
Prepare for each trading day by defining your plan and your purpose, by gently reinforcing your trading rules, and maybe even using visualization techniques to practice making rule-based decisions under various trading conditions. Then, when entering the markets, you can be more clear-minded and decisive, with no need to impart so many little reminders in real, live conditions, much like my golf partner did.
Do you ever cover your charts with multiple lines and indicators, or jump quickly between trades, markets, assets, or time frames? If so, it’s among the more common trading habits, but it’s also the enemy of simplicity. In fact, often times, being more controlled, more focused, and doing less, not more, is what’s needed to achieve consistency and improved performance.
Notice how my golf partner was fixated on seemingly everything, from his hand and head position, to tempo, follow through, and the like? Clearly, it made for too many swing thoughts, and amidst all the incessant reminders about what to do—and not do—his results routinely suffered.
See also: Easy Ways to Simplify Your Trading
My advice? Work on problem areas one at a time, never all at once, and do so in a demo environment. Then, when trading live and using real money, keep your thoughts and actions simple and sensible.
We’ve discussed here before that one of the trading habits that sets successful traders apart is their propensity to be patient with winning trades, but notoriously impatient with losing ones. This tends to go against the natural inclinations of many, but it is indeed one of the qualities that builds a foundation for lasting trading careers. And, of all the trading habits to continually grow and refine, this might be one of the most important.
In contrast, getting into the habit of, say, moving your stop to allow a losing trade more room to “turn around” tends only to cause further losses, when a losing trade doesn’t deserve that kind of patience. Rather, develop trading habits that minimize losses and let profits run, which will include quickly exiting inevitable, losing trades, and staying patient with winning trades so long as the initial case for going long still remains.
Over the long term, the best athletes tend to prevail in sporting competition, and in business, it’s often the smartest and most innovative that remain at the top. In trading, however, success isn’t dependent upon much other than the quality of your strategy and how disciplined you are about sticking to it.
That in itself makes discipline one of the most valuable trading habits to cultivate. So rather than constant reminders about mechanics, or money, or psychology, what if all you really needed to fixate on was your strategy and staying plan compliant? Just think of how many unnecessary worries that might eliminate on your behalf, too!
By now, it’s become clear that most traders tend to have a lot on their minds at any given time! We think about mechanics, past outcomes, news and outside opinions, and so much more, but here’s something funny…most traders never stop to assess their own thought processes! And yes, you read that right, I really am suggesting that you think more about your own thinking while trading. It’s part of a psychological process known as mindfulness, and I can attest that it can do traders a world of good!
Mindfulness can help us identify—and ultimately reverse—unproductive thought patterns, like monetary and other biases, and perhaps lingering anger or emotions coming from prior, negative outcomes that are now beyond our control. I firmly believe that its power to prevent non-productive thoughts from interfering with our trading is all the reason one needs to make mindfulness one of their desired trading habits.
Remember that all of these trading habits are learned skills that don’t come naturally to everyone, even the pros! With proper emphasis and practice, though, it’s possible to develop good habits while also eliminating bad ones. For help, join The Lazy Trader member community, where you’ll find continuing education, timely trade ideas, lessons on technical analysis and trade psychology, and even one-on-one mentoring opportunities. Begin your no-risk trial today by clicking the banner below to get started!