One reason you may have difficulty changing your trading habits is that you are simply not prepared for them.
You may THINK you’re ready for change, but you’re more likely being pushed into it by the beautiful calendars and notebooks you see on social media.
Making changes successfully demands dedication and practice, which you won’t get if you’re simply half-hearted about changing your behaviors. This is why the first thing you should do is assess your readiness for change.
Carlo C. DiClemente and J. O. Prochaska, two well-known alcohol researchers, created a change model to aid clients with their addiction problems a few decades ago.
The idea is that determining an alcoholic’s readiness for change will assist doctors in determining which treatments will work best for each individual.
While traders are not addicted (I hope), the Stages of Change paradigm can be applied to trading habits:
This is referred to as the “denial” change. This is where you don’t even realize – or refuse to acknowledge – that you have an issue that needs to be handled.
Even though your trading account indicates otherwise, you do not believe you require assistance or intervention at this time. You’re still probably blaming your losses on the markets, your broker, your computer, or your cat.
If you’ve been suffering from large and frequent losses but can’t figure out what’s wrong with your execution, it’s time to get assistance.
Find a trading mentor or ask other traders questions. Learn what’s going wrong and what you can do to enhance your trading performance.
Have you tried cliff leaping or bungee jumping? If you have, recall the moment when you were staring down right before the jump.
You know what you need to do and that you SHOULD do it, but there’s one tiny moment when you just can’t seem to jump. That is the purpose of this step.
Traders in the contemplation stage understand their difficulties and what they need to accomplish. However, obstacles such as money, time, and laziness prevent them from making the leap.
For example, suppose you want to trade the London session but are unable to get up early enough. Or perhaps you believe that trend trading will provide you with extra pips, but you haven’t read anything about it.
At this point, you or your trade mentor should concentrate on breaking down goals into more manageable tasks and on taking action.
Once you’ve decided to take action, your primary focus should be on learning the skills or developing the discipline required to advance your cause.
This is where you put a stop loss on your transactions, stick to your trading plan, or avoid the markets when the chances aren’t in your favor.
Remember that simply wanting to change is not enough. You must also have the necessary abilities and a solid plan. If your initial intentions don’t work out, make changes along the road.
The final and most hardest aspect of developing new habits is sticking to them. Isn’t it true that most individuals forget their New Year’s resolutions by the end of January?
Once you’ve begun to execute your changes, your focus should shift to making them automatic.
This is where you create a reward system or seek assistance from trading groups. If you work hard enough, you can turn your new trading rules into good trading habits.
Many traders fail to follow through on their transformation plans because they often rush into them without appropriate planning.
However, if you are cognizant of your objective and work tirelessly to make those changes second nature to you, you will have a better chance of not repeating the same resolution next year.