Do you struggle from FOMO (Fear of Missing Out)? Does it usually end with a bad loss and you tell yourself, “I’ll never do that again,” then you do? How do we break bad habits?
Step 1: recognize it’s a bad habit.
The first step to making any change is being totally aware that due to the unwanted outcomes, a change to your current behavior is needed.
Step 2: learn to recognize the oncoming behavioral pattern so you can stop it as it starts to develop.
How do you do this? You visualize the bad behavior playing out or think back to a time when you had the unwanted outcome. My biggest losses early on were due to breaking news alerts so I’ll use this as an example. Imagine we’ve just had breaking news, the stock is tanking and you’re rushing to get the chart on your screen. Take note of all the feelings and physical reactions you are experiencing. How fast are you breathing? What thoughts that are racing through your mind? Are you calm and steady or is there adrenaline? Are you angry? Are you afraid? Are you excited? Is there a knot in your stomach? Now the trade is over and you’ve approached it like you normally do (the same bad habit we’re trying to change) and you have had the same undesired outcome. Go back and look at your notes, did you take any shortcuts? Did you break any rules? Did you oversize? What did you do wrong? Not only do you know why this bad habit causes your trades to fail every time you approach it this way, you also know what market circumstances set you up for the preconditioned emotional responses. Now we know what behavioral patterns we are looking for next time.
Step 3: “We are what we repeatedly do. Excellence, therefore, is not an act but a habit,” Aristotle.
We need to rewire our preconditioned responses to the new desired response or habit. We do this with practice. Now that we can recognize the unwanted behavior we must develop a process that describes what we will do once it is happening. Some walk away from their trading desk to eliminate any chances of foolish trading, some take a walk, and some will switch over to paper trading. One method that has worked well for me is called visual imagery. Brett Steenbarger uses this technique with his clients and describes this process more in depth with his Chat With Traders interview.
I typically develop my watch list during premarket but if at the open I had not found anything that I was interested in trading, I used to have the tendency to jump into the 1st ticker that spiked. This was a costly bad habit that I needed to break as all I was doing was chasing the move. So the next time a morning like this presented itself I would spend a few mins before the opening bell visualizing my desired response.
Anytime I need to practice with visual imagery I have meditation music on, focus on my breathing, close my eyes and visualize (in this case the opening bell). The bell rings. Everything is running. Normally my mind and heart start to race but not this time because I’m calm and in control. I pick the ticker with the most volume on my momentum scanner and I follow my process for vetting a ticker intraday. I see price action and a chart pattern that I recognize. I have plotted my levels and I wait for the right entry should the opportunity present itself. I do not chase because I know it will result in a loss. Worst case scenario: everyone in chat nailed it; you’re the only one who didn’t catch it! That’s ok, there is always another trade. Keep hunting and it will reveal itself to you. This game is about finding an edge and timing it properly. If you miss this one, just catch the next one. There will always be a ‘next’ one. The right opportunity never presented itself to you and you didn’t want to trade mediocre setups. You did not succumb to FOMO and you maintained discipline and protected your capital.
Brett Steenbarger suggests that every time you fail in the visual practice you should keep practicing until you get yourself to behave as desired. What you are doing is teaching your brain to revert to this desired behavioral pattern subconsciously when under similar circumstances versus the unsuccessful one you had previously.
Trading is a sport of the mind, first understand and accept your personality then cater your strategies and techniques to suit that personality. You are not really trading against a million other strangers, you are trading against you.
For additional information regarding how to develop the proper trading psychology check out Ed’s psychology workshop, The Day Trader Mindset. If you have any other questions or need any additional help please feel free to contact me in the chatroom.
@azintothewoods
Jan 27, 2017
Step 1: recognize it’s a bad habit.
The first step to making any change is being totally aware that due to the unwanted outcomes, a change to your current behavior is needed.
Step 2: learn to recognize the oncoming behavioral pattern so you can stop it as it starts to develop.
How do you do this? You visualize the bad behavior playing out or think back to a time when you had the unwanted outcome. My biggest losses early on were due to breaking news alerts so I’ll use this as an example. Imagine we’ve just had breaking news, the stock is tanking and you’re rushing to get the chart on your screen. Take note of all the feelings and physical reactions you are experiencing. How fast are you breathing? What thoughts that are racing through your mind? Are you calm and steady or is there adrenaline? Are you angry? Are you afraid? Are you excited? Is there a knot in your stomach? Now the trade is over and you’ve approached it like you normally do (the same bad habit we’re trying to change) and you have had the same undesired outcome. Go back and look at your notes, did you take any shortcuts? Did you break any rules? Did you oversize? What did you do wrong? Not only do you know why this bad habit causes your trades to fail every time you approach it this way, you also know what market circumstances set you up for the preconditioned emotional responses. Now we know what behavioral patterns we are looking for next time.
Step 3: “We are what we repeatedly do. Excellence, therefore, is not an act but a habit,” Aristotle.
We need to rewire our preconditioned responses to the new desired response or habit. We do this with practice. Now that we can recognize the unwanted behavior we must develop a process that describes what we will do once it is happening. Some walk away from their trading desk to eliminate any chances of foolish trading, some take a walk, and some will switch over to paper trading. One method that has worked well for me is called visual imagery. Brett Steenbarger uses this technique with his clients and describes this process more in depth with his Chat With Traders interview.
I typically develop my watch list during premarket but if at the open I had not found anything that I was interested in trading, I used to have the tendency to jump into the 1st ticker that spiked. This was a costly bad habit that I needed to break as all I was doing was chasing the move. So the next time a morning like this presented itself I would spend a few mins before the opening bell visualizing my desired response.
Anytime I need to practice with visual imagery I have meditation music on, focus on my breathing, close my eyes and visualize (in this case the opening bell). The bell rings. Everything is running. Normally my mind and heart start to race but not this time because I’m calm and in control. I pick the ticker with the most volume on my momentum scanner and I follow my process for vetting a ticker intraday. I see price action and a chart pattern that I recognize. I have plotted my levels and I wait for the right entry should the opportunity present itself. I do not chase because I know it will result in a loss. Worst case scenario: everyone in chat nailed it; you’re the only one who didn’t catch it! That’s ok, there is always another trade. Keep hunting and it will reveal itself to you. This game is about finding an edge and timing it properly. If you miss this one, just catch the next one. There will always be a ‘next’ one. The right opportunity never presented itself to you and you didn’t want to trade mediocre setups. You did not succumb to FOMO and you maintained discipline and protected your capital.
Brett Steenbarger suggests that every time you fail in the visual practice you should keep practicing until you get yourself to behave as desired. What you are doing is teaching your brain to revert to this desired behavioral pattern subconsciously when under similar circumstances versus the unsuccessful one you had previously.
Trading is a sport of the mind, first understand and accept your personality then cater your strategies and techniques to suit that personality. You are not really trading against a million other strangers, you are trading against you.
For additional information regarding how to develop the proper trading psychology check out Ed’s psychology workshop, The Day Trader Mindset. If you have any other questions or need any additional help please feel free to contact me in the chatroom.
@azintothewoods
Jan 27, 2017