What Personal Patterns Limit Your Trading Success?

As traders, we stare at chart patterns all day.  But do you ever think about your personal patterns of thoughts and actions that you bring with you when you trade?

Summertime in the market is a perfect time to review our trading habits—especially those that can contribute to losing trades.

If you were to review your last five trading days, could you identify decisions and patterns that are holding you back from making higher profits? Here are a few that might sound familiar.

  • We plan to day trade but are not prepared. So we jump into a trade late and face an immediate loss.
  • We neglect to check a company’s earnings date and enter right before the news comes out. Maybe we get lucky, or maybe we don’t. Or worse, we forget to check, and sell short the stock… then the company comes out with good earnings and we get caught in a gut-grinding short squeeze.
  •  We chase stocks and enter new positions too late.
  • We execute “revenge” trades.
  • We jump into trades without written-out plans and without identifying risk.
  • We double down on losing trades.
  • We ignore our protective stops.

In reviewing the bullets above . . . when you plan day trade, get to your desk 45 minutes to an hour ahead of time. Know the news and review your trading plans. Know your company’s earnings date and avoid selling short if the date is closer than two weeks to your entry date. Please do not enter trades late or execute revenge trades. Enter trades only with a written-out plan and identify your risk on paper. Please do not double down on losing trades. Stops are insurance against losing money, please use them.

Finally, the only way to change behavior is to make a conscious decision to do so.  And, when we recognize limiting thoughts or behavior, we need to define them, and then replace them with positive thoughts or actions.

Summer in the market is the perfect time to get rid of bad trading habits. Let’s identify and eliminate limiting thoughts and behaviors and replace them with those that help us achieve trading success!