Updated from its original posting on 2013-02-03
Now that you have a list of your trading resolutions for 2014 (at least I hope you have one!), it’s time to work on the proper mindset in making sure that you stick to your goals.
What most people tend to overlook in goal setting is that there is a process to making changes; most goals aren’t achieved overnight. It is a period when you try to replace patterns of behavior that are already embedded in your daily habits with positive new ones.
Making a change is never smooth, so there will most likely come a time when your old patterns will clash with the new ones. It’s normal for the occasional mental relapse or reversion back to old habits because we tend to lean towards doing things we already know or are comfortable with.
For example, let’s say you decided to try out a new diet program. After weeks of eating steamed vegetables and lean meat, you decided to have a “cheat day” and find yourself back to your old habits by scarfing down a double burger and and extra-large chocolate milkshake.
This is a relapse that could lead to more “cheat days” and derail you from your goals. In trading, after doing well with your new trading strategies, you might be overconfident and relapse into trading without a stop loss or overtrading.
Fortunately, one good thing about these phases is that you can get over it if you exert enough effort. Here are some tips on how you can recover from that phase:
The first step is to accept that you will encounter relapses. Embrace it. Set up the dining table and cook dinner for these relapses.
Why? It’s perfectly normal and okay to have relapses. Relapses aren’t just obstacles that stand in the way of progress – they can be a helpful part of the entire process of change. They can make you consciously return to the positive, new habit, which internalizes your goals even more. Besides, not accepting this part of change may cause you to put unnecessary pressure on yourself.
Another way for you to help overcome relapses is to consistently update your trading journal each and every day. How many days in a row were you able to avoid taking profits early? Have you been eliminating silly mistakes like forgetting to place a stop?
Grade yourself on how well you are living up to your resolutions to help you see how far (or near) you are to achieving them. Without measurement, you’re not really managing your progress.
If you lack the self-discipline to monitor yourself, you can always look for a trading buddy. This person can help motivate you and keep you in line with your resolutions. Having someone look over your shoulder may just give you the pressure that you need to push forward, improve, and reach your goals.
So don’t be too hard on yourself and declare that you can’t do something after the first relapse. It takes a CONSCIOUS and CONCENTRATED effort over time to develop good habits that will finally replace the old, bad habits. It is from this battle between new (good) patterns and old (bad) patterns where you will experience change and grow as a trader.
Making changes takes time and a lot of effort, but consistently putting in the hard work will pay dividends in the long-run. Remember, we’re only one week into the year. Don’t give up!