Last week, in Part 1 of this two-part series, we began to consider how best to reward ourselves for good trading by asking an important question: What constitutes “good trading,” anyway? And while monetary outcome alone may be less than ideal for doing so, more realistic and process-based measures like discipline and plan compliance will likely serve you much better in the long term.
Now today, we turn our attention toward actual rewards and how best to make yours count. For example, how often might you earn a reward for good trading? And, of course, what might a worthwhile reward be?
We’ll cover these topics and more this week as we conclude this article series with one important goal in mind: To help you empower good trading and promote the repetition of trading habits that are important to your continued trading success.
We’ve discussed the many merits of having a reward/punishment system before, but never explicitly said how often rewards and punishments should be doled out. And, in fact, the frequency is different for both, because, while a broken trading rule should result in immediate consequences—like a suspension of trading, perhaps—rewards for good trading should be earned over (slightly) longer periods, like a week, a month, or even an entire quarter.
Why, you ask? Well, it’s because trading well for the long-term requires the repetition of good habits, so, in order to make your reward system most effective, it should work the same way, incentivising you for repeating good behaviours, not just producing them on one or a couple occasions. Here are examples:
In essence, thinking about your own trading objectives, tendencies, and shortcomings is an important step for setting goals and developing a reward system that better enables you to promote good trading. Those who might struggle with trade execution, for example, might track the quality and efficiency of their execution, and earn a reward for, say, 95-100% execution over the course of a month or quarter. Meanwhile, any traders who tend to get angry and “revenge trade” might reward themselves for keeping their cool for an entire month or quarter and achieving zero instances of emotionally fuelled trades for that period.
So, what qualities and/or behaviours are important to your trading success, and how might you incentivise them using your reward system going forward?
And now for the fun part: Determining the rewards and incentives you can have in return for good trading over a given period of time. Most traders think this is easy…just withdraw some money from your trading account and go spend it however you want, right? Well, not so fast…
Claiming monetary rewards for good trading is fine, even natural and recommended, but whatever you do, please consider how you can make the most of your rewards by making them meaningful, significant, and perhaps most of all, tangible! And here’s why…
Too many traders are quick to reward themselves by cashing out money from their account and buying some tech gadget, item of clothing, or fancy dinner. And it’s not long before dinner is over, the gadget is buried in some drawer, and the clothing is just hanging around in a closet. Sure, there was enjoyment for a few, fleeting hours, but ultimately, the moment passed, and so, too, does your appreciation for the reward you earned from all of your good trading.
To do it better, make rewards more meaningful, coveted items, and allow fond memories to live on right there at your trading desk where you can see and appreciate them regularly. For example, maybe your reward is the new pair of Air Jordans that your son or nephew has been asking for, and rather than simply buying them and moving on, you take a photo of him beaming with pride and excitement as he puts them on for the first time. Seeing that photo each day at your trading desk will make for a lasting reminder of the value of good trading, and who wouldn’t want to repeat more memories like that by replicating the behaviour(s) that made it all possible?
So rather than a new rifle or golf club for yourself, aim higher with your rewards whenever you can. Take your family on a nice holiday, and keep a photo album on your trading desk with all those memories. That will mean much more to you in the long run than the sporting equipment ever will, and it’s a fine example of using your rewards for good trading for maximum benefit, thus creating plenty of incentive to trade well and according to plan now and throughout your career.
Follow along with us as we analyse and trade the markets, and receive continuing education and timely trade ideas that can help you earn those coveted rewards much faster than you otherwise might while working on your own. Claim your no-risk trial membership to the Lazy Trader community by clicking the banner below…do it today!