Simple Trading Rule #3: You Will Be What You Repeatedly Do

Simple Trading

“We are what we repeatedly do.  Excellence then is not an act, but a habit.”

— Aristotle

Over the years, we’ve spent quite a bit of time working with trading experts.  Early on we worked with them as the student/mentee.  More recently we have worked with a select few to develop training courses and other material designed to help the uninitiated learn the fundamentals of short-term trading.  Each expert specialized in some distinct aspect of trading… psychology, strategy, tactics, risk management, automation, etc.  Almost to a person, each of these accomplished individuals thinks of their area of specialization as THE key to consistent trading profitability.  With respect to each of them, they are all wrong.

What we’ve found in doing research, working with experts and beta testers is that the most important thing isn’t some isolated trading secret.  In fact, despite the importance of having a well-defined and tested trading plan that includes all of the aforementioned areas of specialization, this alone will not speed you on your way to trading success.

If not the plan then what?  In a phrase, it’s your habits (more specifically, your trading habits) that make all the difference in the world.

It’s fascinating, really.  We could give beginners 7 different short-term trading plans — trend, counter-trend, arbitrage, news announcements, catalyst driven, momentum, indicator driven —or any of a number of other approaches… it really doesn’t matter… most people would fail to trade profitably… and fail miserably at that.  Why? Because it doesn’t matter how good the trading plan or style is if people won’t follow it consistently.

The problem isn’t that people don’t know or can’t learn trading basics. They generally either know or can learn the concepts very easily.  Most people can recite the Trader’s Mantra “cut your losses and let your profits  run,” with barely a thought.  Further, they understand that this underlying pillar applies no matter what strategy or approach they follow.  The real problem is that most would-be traders will only follow their rules (assuming they have them) for a little while before abandoning them and reverting to account destroying activities.  Instead of exercising profit boosting behavior, these folks blindly adhere to habits which give them results that are the exact opposite of what they seek.

So how do you get people to do the right thing, as opposed to the wrong thing (insofar as trading goes)? It’s not even a matter of motivation. You can generally motivate people to do the right things for a short period (or a few trades).  That’s not the hard part. The hard part is figuring out how to get them to stick to it.

When we first started writing, we knew that not only did we have something to say, but also that we could write regularly for a few days.  We had already done it several times before.  But never, in those multiple attempts at writing consistently, could we stick to it for long enough to build a bank of high quality, original content.

Then it occurred to us… Apply the same principles that we used to complete college and graduate school, or to build a Wall Street client list filled with some of our former firm’s best clients.  What is this secret? Motivation? A good plan? While both of these components were pivotal, the most important task was learning to create the correct habits and figuring out how to make those habits stick.

It was that simple.

The same process works in trading.  Learn the rules, internalize them and make acting congruently with them habitual.  Sounds pretty simple doesn’t it?  And yet, most of the major trader education programs fail to address this. They bring folks in for anywhere from a day to a few days to learn a “secret” trading method that will yield the profits and lifestyle of their dreams.  Unfortunately, very little (if anything) is done to facilitate students sticking to the rules of the “secret” approach.  We can’t understand why — having a set of specific instructions and rules are useless if you don’t stick to the plan for longer than a day or even a week or two.  Following a detailed plan religiously for two weeks is great, but what happens after that? Do you keep going? Usually the answer is no.

Whatever trader education/training program you choose, make sure it addresses this most important of areas.  Like losing weight and becoming healthier, joining the ranks of consistently profitable traders requires a shedding of bad habits (chasing trades and failing to use stops) and replacing them with good habits (exercising your well-developed Emotional Capital).

Good, simple trading habits alone won’t make you a profitable trader.  That said, without them, you are virtually assured of sub par performance.  So, learn the basics, make them a part of your Trader DNA and form proper trading habit(s).  The rest will fall into place.

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