Here is my list of recommended ways to get rid of bad habits:
- Move your trading office. If this is not possible, then move your desk or get a new one, and change the entire office space. If you are in a living room or a family room where others congregate you must move to a quiet location, even a large closet will do.
- Put motivational things on the walls. These are personal preferences for example, some investors or traders have quiet serene pictures. It helps to have something to look at from time to time to clear your head.
- Change your work habits. If you always studied at night during the week then change to mid-day, early morning, or weekends only. This may sound impossible but where there is a will there is a way. If you get up a half hour earlier and only allow that much time for your trading, that in itself will be a discipline action. Many times investors and traders spend way too much time on trading. It can be done successfully with as little as a couple of hours on a weekend, depending on your trading style. If you are spending several hours a day on trying to find stocks or general trading activities, then you are working too hard and are likely to choose weaker picks and start to become more lax in your rules and parameters. Limit your stock pick analysis to one hour or less.
- Write down specific goals for the week, month, quarter, and year. Modify them if necessary as time goes by. Stick to your
- Write down personal investing rules and parameters for trading, and stick to those rules. That means not deviating from your personal rules and parameters no matter what.
- Decide on a trading style for example Long Term Investing, Position Trading, or Swing Trading, day trading. Be sure you have sufficient knowledge, education, and experience for that style. Do not choose a style because a friend, trading buddy, does it or because you feel it is prestigious. That is a bad habit.
- Decide on 2-3 strategies you will use, ignore everything else. The fewer strategies you use, the more focused you will be and the less likely to be distracted. Also, you will make fewer mistakes in your trading.
- Use only 1-2 sources of commentary and news about the market. Cancel subscriptions to magazines and newspapers that clutter and influence you to experiment. Remember that 80% of what you read on social media and the internet is not based on facts but merely someone's opinion. Many internet articles are full of misinformation, disinformation, and rhetoric skewed data. Don't experiment. Stick with a set plan.
- Realize that not every day is a good entry day in the market. Accept that you won't be in every stock that runs suddenly. You goal should be to find a few great trades a month, rather than dozens of poor quality to lousy trades. Most Investors and Traders trade too often. This leads to Traderitis and that leads to major losses. Choose only excellent picks. Instead of trying to find something to trade, look at each stock to find every reason not to trade it. When you can find nothing wrong, then you have an ideal pick.
- Limit your time to study and search for stocks to buy. Most traders make this more work than it really should be. Work smart, rather than work hard. For example working hard would be to dig a well by hand, and working smart would be to rent a backhoe.
- Include a family member in your investing and trading. Try to show and teach them about the market. Express your ideas, theories, and knowledge with them and these discussions will cement what you have learned in your mind. This will help clarify what areas are still confusing, or you lack focus, or direction for you. The inclusion of a family member will also give you someone to bounce ideas off of and will bring a second opinion to your trading, which is always a way to balance out extremes of emotions. If you don't have a family member that is interest in stocks, then find a trading buddy.
- Nothing is a sure thing, not in life nor in trading. Accept this fact and accept that from time to time you will make a weaker choice of stocks to trade. Exit immediately and don't regret the mistake. Mistakes are learning tools only. Accept that there will be times that the market will behave not as you expected it to behave. Not every stock will return huge profits every time. You should strive for a 75-80% success rate. Pros range in the 80-95% success rate. If you settle for a 40-50% success rate as most retail traders are encouraged to do, then you will soon be out of capital.
- Focus. Most traders lack the discipline to stay focused on a specific pre-defined style and set of rules. Commit to a style and strategy for at least 6 months before making the determination that it works or doesn't work.
- Make a decision and hold to it. Don't second guess yourself each day by over analyzing your holds. Don't move up stop losses without good reasons. Use appropriate technical patterns for stops which helps you control emotions while holding.
- Accept that it takes time to change, and there will be times when you derail and slide back down into bad habits. When this happens stop investing or trading for a week. Then restart by reviewing your rules and strategies, and move forward from there.
