24 September 2019

Building good habits builds better hopes of trading success

We are all creatures of habit and habits can determine our potential for success in all walks of life. It is no different with Forex trading.

Bad habits cost money and good ones give you the best chance of making consistent profits.

The trading world is an intense pressure cooker environment that facilitates the growth of good and bad habits. This happens because the brain is programmed to take snapshots of highly emotional times and will trigger you into similar states when confronted with the experiences that are similar in nature.

Breaking your own preset trading rules is an easily formed bad habit that can lead to many negative emotions and subsequent poor decisions that only compound the original error. The trouble is that once the spiral becomes a pattern, it’s very difficult to break out of a habit that has almost become automatic.

Bad habits can form as an almost automatic response to the realisation that some form of pain is coming and the response (albeit a bad one) is an attempt to avoid the pain. Conversely good habits form naturally around positive experiences and the little dopamine hits that these can generate.

An awareness of this will help you to cultivate good habits and eliminate bad ones.

In a trading sense here is how to break bad habits and turn them into good ones.

  • Truthfully recognise the times when you broke your own rules, then work to identify any consistent triggers or patterns by
  • Asking yourself what was happening leading up to your action. Were you looking at price movements or news? What were your thoughts at the time? What did you do physically prior to breaking your rule? Did you lose your cool? Did you compound the problem further by breaking another rule?
  • Take the time to write down your feelings, thoughts and actions that led up to you breaking your rule. By doing this you will be able to put your finger on what the dangerous pattern of behaviour is.
  • Once you understand what the bad pattern of behaviour is, take steps to change the routine. Put circuit breakers in place and establish a new routine that will help you avoid falling into the same old trap.

A new routine won’t become a habit overnight. It takes practice until it becomes automatic. The prevailing thinking is that it takes somewhere between sixty and ninety days to make a new behaviour automatic and habitual. The longer you practice it the easier it is to adhere to. When you take the time to build good habits, something almost magical happens, your mind will actually begin to crave the good feelings that the good habit produces.

The keys to building good trading habits are:

  • Take the time to build a results focused routine based upon a certain cue.
  • Gain an understanding of how your behaviour rewards you.
  • Keep practicing the new habit until your mind starts to desire the reward and you begin to respond automatically.

Practicing good habits and eliminating the bad ones will help you to build a stronger trading strategy. There is no better way to improve your trading than to have your very own personal FX coach & mentor, and when that coach is Rob Clayton you know you are in good hands! When you arm yourself with up to date information, education, one on one coaching by our USGFX analyst and combine that with good trading habits your chances of sustained Forex trading success will improve markedly.

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