Trading habits should be at the forefront of your actions. 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 with this kind of awkward procession happening before most shots, I had plenty of time myself to relate this. I have seen the same with trading habits over the years.
Of all the qualities we may think we have to embody with each trading day, there are really only a few trading habits that matter. Here are five (5) trading habits that we should be concerned with. Anything else might just be overkill.
What are your trading habits
5 trading habits to increase your success
What habits will you develop
It is often said that good traders “Do their homework,”. I will be the last to suggest spending any late nights and early mornings pouring over charts and economic news and data. It is still 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 technical analysis patterns that you are more likely to trade.
Prepare for each trading day by defining your plan and your purpose. Gently reinforce your day trading rules. You may want to use visualization techniques to practice making rule-based decisions under various trading conditions. You can then be more clear-minded and decisive when entering markets. As a result, you will have 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 did you jump quickly between trades, markets, assets, or time frames? If so, it is among the more common price action trading habits. It is also the enemy of simplicity. In fact being more focused and doing less, not more, is what is needed to achieve consistency and improved performance.
Notice how my golf partner was fixated on seemingly everything. Clearly, it made for too many swing thoughts. Amidst all the incessant reminders about what to 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. Do so in a demo environment. Then, when trading live and using real money, keep your thoughts and actions simple and sensible.
We have discussed here before that one of the trading habits that sets successful traders apart is their propensity to be patient with winning trades. Yet they are notoriously impatient with losing ones. This tends to go against the natural inclinations of many. 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!
See related: Mindful Trading Thoughts I Practice…and You Should, Too
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.
Different traders will have different trading habits they subscribe to. These habits are the basic ones that everyone learning to invest should know. How much importance you place on every one is down to you. You will probably develop your own, yet starting with the above 5 will put you in a good place to be successful as a trader!