How to Replace Your Bad Trading Habits with Good Ones
As a binary options trader, you are by definition going to be a creature of habit. Each day, you probably wake up and tackle the same basic routine. You watch the charts at a certain time of day, you research and learn, you test new strategies, you improve old ones, and at some point during the day, you place trades and monitor them. Because habits are so critical to your success, it is extremely important that you cultivate good habits! But all of us have at least a few bad habits, and bad habits can be terribly detrimental to your trading!
Now that we are heading into 2015, this is a great time to take a look at your trading habits, good and bad, and decide to overcome your bad behaviors. Make it your New Year’s resolution to tackle your worst bad habit—the one which causes you to lose the most money. If you can eliminate just that one bad habit, you will probably see some major improvements in your bottom line.
What should you do if that one worst habit is one of the hardest to change? One good idea might be to make two lists of bad habits. On one list, you write down your bad habits from top to bottom with those on top of the list being the least damaging and those on the bottom of the list being the most damaging. On the second list, you write down your bad habits from top to bottom with those on top of the list being the hardest to break and those on the bottom being the ones you suspect are easiest to break.
Once you have those two lists, look down near the bottom of the list and see if you can spot a matching entry. Try to find the worst habit which would be easiest to break. It may not be your very worst habit and it may not be your very easiest to break. But it is probably your best shot at making the biggest difference in your trading life right now.
What are some common bad habits that traders cultivate?
- Trading in bad market conditions. Wandering around in “no man’s land” and expecting to make money. This is a form of overtrading.
- Trading when you feel antsy. This is another type of overtrading. Maybe you take a lot of “B” trades instead of sticking with only “A” trades because you feel like you always need to be doing something.
- Not getting out of trades when you know you should.
- Always getting out of trades early when you know you should not.
- Constantly staring at the charts and not doing anything else with your time.
- Adding new indicators and making changes to your trading method and then taking those changes live without adequate testing.
- Making discretionary decisions outside the bounds of your tested system.
- Dropping to a lower timeframe and hoping to make money faster (for example, trading 60 Second options because you are impatient, not because you are good at it).
- Chasing your losses.
- Needing to always be right.
- Setting unrealistic expectations.
- Setting unrealistic goals.
- Seeing what you want to see and not what you really see (this can apply to the charts or it can apply to yourself and your own behavior).
- Trading more money than your money management plan allows.
- Going “back to the drawing board” way too often instead of sticking with a trading method.
This is not even an extensive list, but as you can see, there are a lot of bad habits which binary options traders cultivate without meaning to. This shouldn’t really surprise anyone. It is a complex business, and it is easy to lose track of what you are doing and not even notice the worst errors you are committing.
Do Not Try and Eliminate Habits—Replace Them Instead
Have you ever noticed how impossible it seems to break a bad habit and just let it go, leaving nothing in its place? This is because the underlying causes of your bad habits often do not go away even when you drop your bad habits. That does not mean changing your bad habits cannot help you to tackle the root cause—changing your behavior can help you change how you think and feel. But it is a multi-step process. Plus, when you have a habit (good or bad), your body and mind expect something to happen at a particular time or in response to a particular stimulus. It is almost impossible to just do nothing, and if you try, do not be surprised if your bad habit comes back or another forms in its place.
For that reason, it is generally smarter and more effective to try and replace your bad habits with good ones. Before you even decide to drop a particular bad habit, you will need to have a substitute ready in its place. You need to have a plan for how you will respond when you feel the urge to overtrade or add new indicators to your chart or mismanage your money.
For more abstract habits—habits of thought rather than habits of action—you will need to come up with more realistic, healthy thoughts to replace the unhelpful ones. For example, setting unrealistic goals can be a bad habit. This habit usually stems from a need to always feel like you are doing something. Setting goals may make you feel “productive.” But you need to adjust your perspective to change this habit. Remember that a goal alone does not make you productive, and that striving is not the same as achieving. Allow your desire to feel like you are “doing something” translate into setting realistic goals you can achieve, not unrealistic ones which are perpetually out of your reach.
Techniques for Replacing Bad Habits
How can you get rid of your bad habits and start cultivating good habits that will help you win at binary options trading? Here are some techniques that will help you to change how you think and how you act.
Start by Identifying the Causes of Your Bad Habits
Your first step with any bad habit should always be to try and nail down the root cause. Habits are functional (dysfunctional in many cases, as you know). They all have a purpose, real or imaginary. Good habits help you to achieve your purposes, but bad habits only make you feel like you are achieving your purposes. Here is an example of a bad trading habit and possible causes you might identify.
Bad Habit: Trading in poor market conditions.
- You have a knowledge gap. Maybe you honestly do not know how to recognize good conditions from poor conditions.
- You are trading in poor market conditions as a form of overtrading. Perhaps you feel like you are “doing nothing” if you are waiting for better conditions.
- You are conceited and feel like you can profit or must profit in any market conditions in order to thrive.
Those are not all possible causes of this bad habit, but they are all good examples. In turn, some of these causes may have other causes. But in all cases, we can see remedies. If you have a knowledge gap, you can eliminate it by studying and learning how to tell good conditions from bad conditions. If you are overtrading out of fear that you are “doing nothing,” you should either adjust your perspective on what that really means, or resolve to do something else that is genuinely useful every time you feel the urge to overtrade. If you feel like you have to trade in poor conditions to prove yourself, you might ask yourself why you feel that way and address the root cause of that cause. Or you might look for a more useful alternative to prove yourself. Let us look at another example.
Bad Habit: Taking 60 Second trades whenever you are not making money “fast enough” through other trades.
- Impatience. You are frustrated with your slow progress at trading in general, and are looking for instantaneous results that prove to you that you are “getting somewhere.”
- You are trading the wrong timeframe to begin with. It may be that you should trade 60 Second options, and they are a better fit for you. You may know that intuitively. You can trade 60 second options at CherryTrade. Read more here.
- You feel like you are “doing nothing” while you wait for trades to unfold, and this makes you antsy and nervous.
If you feel frustrated at your slow progress, it may be because you are not getting anywhere, or it may be because you have unrealistic expectations—another bad habit of thinking to replace. If you truly are not getting anywhere, you should replace the urge to trade fast options with an urge to either work on improving your system or finding a new one. If you are trading the wrong timeframe to begin with, replace the urge to trade 60 Second options live and impulsively with the urge to test 60 Second trades in demo mode until you are ready to go live.
If you feel antsy and nervous, you may well find that trading faster options responsibly and systematically is a good cure. Or you may need to find something to do to fill that time instead while you wait for your longer trades to unfold. Instead of jumping into fast trades while you wait, resolve to conduct some backtesting when you feel antsy, read an article about trading, or do something else genuinely useful instead.
Identify Triggers and Break Patterns
If you have a hard time figuring out the underlying cause of a bad habit, or you cannot figure out what triggers your bad behavior, start a new section in your trading journal where you write about your habits. Make a note every time you catch yourself either engaging in a bad habit or feeling the temptation to do so. Write down the date and time and details about your thoughts and feelings and trading environment.
So say for instance you catch yourself taking a “B” trade instead of an “A” trade, and this is a bad habit of yours. Your entry might read something like this:
January 7th, 2015, 10:40 p.m.
Today I took a trade setup that really was not the best, and I lost money. It was late at night and I was feeling depressed and desperate. I felt like I had not taken enough trades this month, and that if I do not trade more, I will never make more money. I was very tired when I made this trade.
Over a period of weeks or months, you might notice patterns in these entries. Maybe you only overtrade when you trade late at night. Replace your night trading activities with trading activities at another time of day and see if that helps; maybe night trading is a trigger for you. Or perhaps you only make foolish decisions when you are feeling down. Avoid trading when you are really depressed. Your mood may be your trigger. If you compulsively trade when you feel depressed, you will need to choose a new habit to address your depressive feelings. Watch comedy skits or paint or talk to a friend on the phone. Do something that will center your emotions again. Make that a habit, instead of overtrading.
Ask for Help
The people you surround yourself with can have a big impact on your life, and that impact can be either positive or negative depending on who those people are and what kind of interest they have in your success or failure. If you have negative people in your life who influence you to make bad decisions, you need to get away from those people and start surrounding yourself with positive people who bring out the best in you. Those people have a vested interest in your success and will help you to break your bad habits.
It can be hard to talk to other people about our bad habits, because we may feel embarrassed or even ashamed. But try and remember that there is not a single person in the world who is entirely free of bad habits. Your real friends and family members will not think less of you because you share your struggles with them. They will think more of you, and will feel honored that you asked them to help you. If you know another trader who shares your bad habits, brainstorm together to come up with ways you can change your habits. Consider enlisting the aid of another trader or a friend or family member as an accountability partner. Give them the power to stop your trading if you continue to engage in bad habits.
Be Prepared for Lapses
Wouldn’t it be great if you could never make a mistake again? Just reading that sentence, you probably can see how unrealistic that is. While you may wake up today and say to yourself, “I am never going to overtrade again,” or “I will never trade emotionally again,” you will. If you accept that now, you will have a much more levelheaded response when you do! No matter how consistent and determined you are, you will stumble at some point down the road. It is very important that you tell yourself now that it will not be the end of the world when you do, and it will not undo all of your hard work and progress. Be ready to acknowledge those lapses and move forward confidently again. It is only when we get really caught up in our lapses that they turn into relapses.
Now you should feel ready to tackle your bad trading habits and start replacing them with good ones! Try and focus on just one bad habit or several to start with. If you try and take on too much at one time, you will make it hard to succeed. With each small victory, you will feel encouraged to change more bad habits into good ones in the future. And remember, even changing a single bad habit will translate to more binary options trading profits. You may even be surprised what a big difference you can make with a seemingly small change!