Saturday, November 05, 2016

Our Trading Psychology Follows From Our Trading Habits

An excellent blog post from Bella at SMB takes a look at basketball star Ray Allen's letter that he wrote to his younger self.  It's an unusually insightful letter, and Bella picks up on one of the letter's important themes: that success is not a function of any single great secret.  Rather, success results from turning the right attitudes and actions into patterns that are so strong that they become "boring, old habits".  We need motivation to kick start us into doing the right things, but rarely can we count on motivation to sustain the right mindset and behaviors.  Repetition--doing the same thing, the same way again and again and again--is what turns a best practice into a robust process.

A mistake many developing traders make is trying to change too many things at one time.  They work one day on their entry execution, the next day on their emotional self-control, the next day on their trade sizing.  All are fine goals, but the scatter-shot approach to change ensures that enduring habits will never result.  It is far better to work on one goal at a time in a concerted manner that builds the right habit pattern than to address many goals and never make the transition from practice to process.

So what's the positive trading habit you most need to develop right now?  And what is the routine you're going to follow to give you the repetition that will turn motivated actions into automatic ones?  Imagine having just one goal every month that you cemented into a positive habit.  By the end of the year, you'd be transformed.  Not through any grand insight or action, but from the accumulation of consistent actions.  We are what we do:  our trading psychology can be no better than our trading habits.

Further Reading:  Turning Success Into a Habit