Success in any kind of trading, including cryptocurrency, mainly depends on three factors: mastering a good trading plan, approaching the market with confidence, and breaking those bad trading habits that people tend to develop either from a lack of knowledge, a loser mindset, or general laziness.
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Of the three factors that affect the approach a trader takes to earning money on the markets, creating good and defeating bad habits is undoubtedly the most difficult because it is tied to emotional and visceral responses to a win or loss on the market.
From seemingly harmless to toxic trading habits, it’s how we cope with and tackle those hurdles that make or break traders. While many traders have been able to master their trading plans, many more have a hard time breaking out of bad trading cycles due in part by their bad habits. The idea is to break the bad habits and develop healthy ones before the losses due to those nasty transgressions break the bank.
Admittedly, we’ve shared the Seven Sins in Bad Trading Practices, and even more has been written on the subject of bad habits in trading, but gentle reminders and a new perspective is always a good thing to help reevaluate our processes and divert bad habits before they become enmeshed in our trading behavior.
Here are some key points to breaking those bad trading habits and earn your way to success.
Know Thine Enemy
To “know thine enemy” sounds pretty archaic but it’s that fundamental knowledge to identify that which traders are fighting against. Everyone is different in their trading style, level of aggressiveness, and their budget, but the enemy isn’t the trading platform or the volatility of the markets. More often than not, it’s the trader themselves who are the enemy.
Some traders refuse to do a little reflection to see where their strategies are weak or failing. They find excuses or become accommodating to those bad habits and losing streaks.
To make money, a trader must be objective – cold, even. Don’t fall in love with the trade – be calculating. If traders cannot do this, they are probably their own worst enemy for their profit margins.
Don’t excuse bad habits. Work on them.
Identify The Triggers
Habits are not formed accidentally. There is usually a ritual or repeated behavior that develops into a bad habit. What are those triggers? Well, identifying them is half the battle.
There is a certain psychology behind triggers which include FOMO, over-trading or revenge trading, to name a few. Most people fall into the category of over-trading and revenge trading because the loss is hard to bear and we want to soothe the bruised ego.
Fear of missing out (FOMO) is also a very real thing. The term “the grass is always greener on the other side” often compels traders to do things they might not otherwise do, thus taking them down a bad path. Triggers can lead to addiction so identify them and divert to more positive behavior.
Action Plan
When a trader looks in the proverbial mirror and realizes they are the “enemy” and they’ve done the work to identify the habit forming triggers that lead them down a perilous road, it’s time to have an action plan that can immediately go into action.
Losing streaks might mean stopping all trades to reassess, research and re-do trades. People are used to losing but oftentimes they’re not very good winners either. Chasing a high can be equally damaging. Too much of a good thing often leads to a false sense of security.
The biggest part of an action plan is to set boundaries and limits. If a portfolio looks like someone threw spaghetti at the wall hoping something sticks, it’s time to evaluate the trading strategy and investment choices. Observe the positive things about the good trades that made the money, and take an objective look at the ones that lost money. Consider the habits that have been developed and the triggers that prompt negative responses.
Successful trading is possible when toxic habits are defeated but a good trader never stops learning, improving, and implementing their action plans. Be flexible enough to change, be the voice of reason, and stay diligent. Market history, charts and analysis are a trader’s friend even when they are their own worst enemy.
Disclaimer
Content provided by CryptoTraderNews is for informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. All information is of a general nature. As always, there is risk with any investment. In exchange for using our products and services, you agree not to hold CryptoTraderNews Pro, its affiliates, or any third party service provider liable for any possible claim for damages arising from decisions you make based on information made available to you through our services.
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