Breaking a bad trading habit is as difficult as quitting smoking. Before you get so hooked up on those habits, you better read this article!
Defining Trading Success
In order to get rid of your bad habits, you need Finance Brokerage Stocks to base success and failures on each of your trades based on how they stick to their trading plans and not merely on whether they were able to make or lose money.
If you make a bad trade (an undisciplined trade, or one that’s not a part of your trading plan), but you make money on it, you still have to view it as some sort of failure. It’s a wise idea to not congratulate yourself because once you do, you’re giving yourself an incentive for something that has not been done correctly.
Meanwhile, if you made a good Forex Broker List trade (one that fit your trading plan perfectly) and lose money on it, you have to view it as some sort of success because you were able to follow your trading plan. More probably, you will blame yourself for losing money on that good trade. You’re punishing yourself for doing something well.
Here’s what you can instead do:
You can analyze the trades to see if your trading plan can be improved and be made more profitable. However, if you continue to reward yourself for undisciplined trades that make money, it will be very difficult to change your habits since you are practically conditioning yourself to make trades that don’t fit in your trading plan.
So you need to be completely honest with yourself to avoid accepting undisciplined trades, no matter how profitable they may be.
Making money on a bad trade, which basically means holding a massive losing position only to have it back with a small profit, is one of the worst things that you can do. Trading like this means making yourself believe that if you only hold on to a losing position long enough, you will gains profits. The problem with this approach is that if it fails just once, it could totally wipe out all your holdings and your trading run will be over.
Changing Your Views
You should learn to get rid of your selective memory. This means that you must remember the time when not sticking to the trading plan hurt you and treat those spontaneous trades as failures.
By instigating a mild form of punishment for not sticking to your plan, you will soon realize that ditching your well-thought out trading plan is a losing proposition over the long run.
When you make a trade that complies with your trading plan, you should give yourself a high five even if you lost some amount of money.
After all, you can always go back and adjust your trading plan. However, the more ingrained your current faulty process of analyzing success and failure, as well as reward and punishment, the more difficult it will be to change them over the course of time.
Every trader can change his or her bad habits, and the best time to do that is right now.