8 Habits of Mind for Successful Trading

If you’ve been deliberate to break the bad trading habits that hold you back from becoming the disciplined, consistently successful trader you want to be, then you should have noticed that trading doesn’t happen in a vacuum.

Life is connected and interdependent in more ways than we imagine.  

Improving one part of your trading life, say discipline, has ripple effects on other areas of life. Trading mistakes often find their way to non-trading aspects of life.

Trading doesn’t happen in a vacuum.

As the benefits and consequences of trading affect every other aspect of life, then we should be able also to draw lessons from different areas of life and find ways of having them impact our trading to the positive.

We’ve explored this idea with our guides for sleep for traders and practicing mindfulness – on the face value, these are foreign to charts and candlestick patterns, but do have an astounding effect on trading results.

And, so, today we’ll lean to the writing discipline and learn how the habits of mind framework can help break bad trading habits, replacing them with good trading habits.

What are the habits of mind?

Habits of mind refer to ways of approaching trading that is both intellectual and practical, and that will support traders succeed at trading and other disciplines of life.

The Framework identifies eight habits of mind essential for success:

  • Curiosity – the desire to know more about trading and the world.
  • Openness – the willingness to consider new ways of being and thinking in the world.
  • Engagement – a sense of investment and involvement in trading.
  • Creativity – The ability to use novel approaches for generating, investigating, and representing trade ideas.
  • Persistence – the ability to sustain interest in and attention to short- and long-term trading goals.
  • Responsibility – the ability to take ownership of one’s actions and understand the consequences of those actions for oneself and others.
  • Flexibility – the ability to adapt to market situations, expectations, or demands.
  • Metacognition – the ability to reflect on one’s own thinking as well as on the individual and cultural processes used to structure knowledge.

The more you do, the more you reinforce a habit.

Curiosity

– the desire to know more about trading and the world around you.

The sheer number of “traders” looking for trading signals and the Holy Grail trading strategy shows that few people are curious enough to understand what’s behind the signals or successful traders.

 Curiosity is fostered when traders are encouraged to

  • through inquiry, seek to understand what moves the markets, what happens in them that affects their trading.
  • seek relevant authoritative trading information and recognize the meaning and value of that information;
  • backtest trading strategies and investigate all new trading ideas before they employ them in their trading

Openness

– the willingness to consider new trading ideas and thinking.            

Have you lost much money hanging onto a losing trade because you are so convinced that the trade will reverse? Not being open to consider what the market and knowledgeable traders could be saying can be disastrous.

Openness is fostered when traders are encouraged to

  • examine their own perspectives to find connections with the views of others;
  • experiment with different trading strategies and ideas for different market conditions.
  • listen to and reflect on the ideas and responses of others—both trading buddies and mentors —to their trading journals.

Engagement

– a sense of investment and involvement in learning.

So many traders are in silos. I understand that all you need is a device that can access the internet. There’s so much to learn about trading if you developed the habit of actively engaging with other traders

Engagement is fostered when traders are encouraged to

  • make connections between their ideas and those of others;
  • find meanings new to them or build on existing meanings as a result of new connections; and
  • act upon the new knowledge that they have discovered.

Creativity

– the ability to use novel approaches for generating, investigating, and representing trading ideas.

Creativity is fostered when traders are encouraged to

  • take risks by exploring questions, topics, and ideas that are new to them;
  • use methods that are new to them to investigate problems, topics, and ideas;
  • evaluate the effects or consequences of their creative choices.

Persistence

– the ability to sustain interest in and attention to short- and long-term trading goals.

Most traders give up at first huddle; that shouldn’t be a surprise as 80%+ retail traders fail. Could it be that most don’t have the heart in them to follow through a process?

Persistence is fostered when traders are encouraged to

  • commit to exploring, in trading, a strategy, trading idea, or demanding task like keeping a trading journal;
  • grapple with challenging ideas, emotions, journaling, or making trading plans;
  • follow-through, over time, to complete tasks, processes, or trading goals; and
  • consistently take advantage of trading communities and trading opportunities to improve and refine their trading systems and perspectives.

Responsibility

– the ability to take ownership of one’s actions and understand the consequences of those actions for oneself and others.

How many times have you blamed the market? Or the tip from a friend or the signal provider?

Responsibility is fostered when traders are encouraged to

  • recognize their role in trading;
  • act on the understanding that there is a lot to learn about trading from other traders in real life and writings like books or blogs;
  • engage and incorporate the ideas of others; but
  • realize they are ultimately responsible for their trading results.

Flexibility

– the ability to adapt to market situations, expectations, or demands.

The market is never wrong – traders are just not flexible to flow with it.

Flexibility is fostered when traders are encouraged to

  • approach daily trading in multiple ways, depending on the market direction – ranging markets call for a different approach, so do trending markets;
  • recognize that they will only make money when they are flexible enough to act on what the market is saying; and
  • reflect on the trading choices they make.

Metacognition

– the ability to reflect on one’s own thinking as well as on the individual and cultural processes and systems used to structure knowledge.

This last habit of mind is where most traders fail, this has a lot to do with trading psychology.

Metacognition is fostered when traders are encouraged to

  • examine processes they use to think and make their trading decisions;
  • reflect on the trading journal entries they make in a variety of contexts;
  • connect choices they have made in trades to underlying habits and ultimately trading results; and
  • use what they learn from reflections on one trading session to improve on the subsequent trading sessions.

Last words on habits of mind for traders.

Becoming a disciplined, consistently successful trader is not easy.

The sad truth is that there is no shortcut to it. If you are not putting in the effort, you will ultimately fail.

The beauty, though, is that it is not rocket science. All you need to do is align your mind to what the markets are saying.

The habits of the mind will certainly help you become a better trader.

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