For many traders, the start of a brand new year represents a fresh opportunity to improve their trading performances by tweaking their existing habits.
Unfortunately, more than a few trading resolutions are forgotten almost as soon as they’re listed on the trading journal. By the way, if you don’t have a trading journal yet, you should read the reasons why you should!
One reason why you might have trouble making changes is that you’re simply not ready for them.
You might THINK that you’re ready for change, but you’re more likely just pressured into making them by the fancy planners and journals you received over the holidays.
Successfully making changes requires discipline and repetition and you won’t get either if you’re only half-hearted about changing you habits. This is why the first thing you should do is to check how ready you are for changes.
A couple of decades ago, two well-known alcohol researchers, Carlo C. DiClemente and J. O. Prochaska, introduced a model of change to help clients with their addiction problems.
The idea is that identifying the alcoholics’ readiness for change helps doctors pinpoint the treatments that work best for each individual.
Let’s call this the “denial” change. This is where you don’t even know – or are refusing to recognize – that there’s a problem that needs to be addressed.
At this stage, you don’t think that you need any help or intervention even though your trading account says otherwise. You’re still likely blaming the markets, your broker, your computer, or your cat for your losses.
If you’ve sustained heavy and consistent losses but unable to pinpoint what’s wrong with your execution, then it’s time to get help. Find a trading mentor or ask questions from other traders. Find out what’s wrong and what you need to do to improve your trading performance.
Have you ever gone cliff diving or bungee jumping? If you have, then remember the time when you’re looking down just before the jump. You know what you need to do and you know that you SHOULD do it, but there’s one brief period of time when you just can’t seem to jump. That’s what this stage is about.
Traders who are in contemplation stage know exactly what their problems are and what they need to do. But there are barriers, such as money, time, and laziness that keep them from making the jump.
For example, you want to trade the London session but can’t wake up early enough for it. Or maybe you think that trend trading would give you more pips but you haven’t read much about it yet.
At this stage, you or your trading mentor should focus on breaking down goals into more achievable tasks and focus on actually taking action.
Once you’ve decided to take action, your focus should be on acquiring the skills or discipline needed to further your cause.
This is where you actually put a stop loss to your trades, stick to your trading schedule, or stay away from the markets when the odds aren’t in your favor.
Remember that willingness to change is not enough. You must also have the required skills and a concrete plan. And if your initial plans don’t work, make adjustments along the way.
The last and definitely the most difficult part of making new habits is being consistent with them. Heck, isn’t that people usually forget their New Year’s resolutions by the end of January?Once you’ve started implementing your change, your focus shifts to making them automatic.
This is where you develop a reward system or turn to trading groups for support. If you’re determined enough, you’ll turn your new rules into good trading habits.
A lot of traders fail to follow through on their plans to change because they often dive right into making them without proper preparation.
But if you’re mindful about your purpose and if you diligently work on making those changes second nature to you, then you’ll have a better chance of not putting the same resolution back on your list next year.