In the spirit of Halloween, I thought we’d discuss ten (10) of the spookier habits we see traders struggling to overcome.
Averaging Down.
Holding and Hoping.
Waiting for Confirmation.
Thinking it’s easy.
Not adapting quickly enough or not at all.
Throwing darts.
Not doing nothing. (Yes, I typed that correctly)
Ignoring rules.
Overthinking.
Not tracking trades.
Let's briefly discuss each of these:
1: Averaging down is something you can get away with when you’re INVESTING. So many people already have this habit when they start Day Trading because of their swing/investing experiences. Listen to CNBC for any length of time and you’ll hear about “dollar-cost averaging” from some guy with a tie saying he’s buying more shares of his favorite stock after a 15% decline due to crappy earnings. If your holding period is long enough, this can work. If you want to be a Consistently Profitable Day Trader over the long haul, you can never do this. Your holding period is until 4pm, at the latest.
2: Let’s be honest, for most people we should call this holding and praying. PLEASE GOD, just get my stock back to my entry so I can sell and I promise never to do it again. 2 Days later: PLEASE GOD, just let my stock bounce a little, I promise I’ll sell as soon as I’m only down 50%. This is almost the same mindset as averaging down but praying isn’t a strategy. The market doesn’t care what you want and need so you think some higher power will? As a day trader, you must be quick and nimble. When you’re wrong on a trade (you’ll be wrong a lot) just get out, get over it and start looking for the next one. By the way, if you didn't see our webinar on this topic, you can watch it by clicking THIS.
3: Good things come to those who wait! Nope, not if you’re a Day Trader and waiting for the wrong things. When you see an A+ Setup that checks all your boxes and meets all your parameters, push the buy button. Don’t wait for confirmation from your chat room or some lagging technical indicator. Have the confidence in yourself and your A+ Setups to quickly take the trade EVERY SINGLE TIME.
I will note there is one thing you should be waiting for and watching closely for confirmation. Wait for sellers to get taken out BEFORE taking a trade. Think $DRYS on Friday. Several were looking to take the early hod break of .97. I suggested they take a hard look at the sellers. It seems some missed what I typed in chat so I jumped on the mic to talk about it too. A couple of traders heeded the sellers.
4: Day Trading is freakin’ hard! Where have we heard that before? HERE. You can’t have the wrong mindset. You MUST give it the respect that it deserves and treat it like the PROFRESSION that it truly is. Day Trading isn't a job, it's a career.
5: Again this week, we quickly saw the price action in the markets change. Those who adapted quickly aren’t as frustrated and are finding other Setups to trade. Those who haven’t adapted and are trading like they did in early October are ready to smash some pumpkins to relieve some of their frustrations. But wait, they can’t afford the pumpkins right now… You can read more about my thoughts on this topic by clicking the pumpkin.
6: We constantly preach and teach that one of the keys to becoming and staying profitable is ONLY trading your A+ Setups. Even after you’ve mastered those, it’s easy to get bored and/or frustrated and start talking yourself into taking trades you know you shouldn’t take. Anytime you hear yourself say something like “sure, this trade MIGHT work”, don’t take it and go find an A+ Setup. And if you can’t find one, go directly to #7.
7: Wait, what? It’s OK for me to sit at my desk in front of the screens and NOT be in a trade? That’s right, but we’d really prefer that you stand. A LOT OF THE TIME as a Day Trader you should be doing nothing. Too many traders think they must always been in a trade. Some even feel lazy or they’re doing something wrong if they aren’t constantly pushing the buy and sell buttons. Sitting, waiting and doing nothing, except for looking for your next trade, is how you should be spending most your time.
8: There’s a HUGE difference between having a set of rules and following your set of rules. It’s like having a treadmill in your basement, never using it and wondering why you’re still out of shape. The treadmill can’t force you on it. Only YOU can do that. Same with your trading rules. So, pick up that piece of paper every morning and read your rules aloud. Make them a priority and a crucial part of your morning routine. Eventually they will become engrained in your brain and good habits.
9: You can ALWAYS find a reason NOT to take a trade. The market never gives you perfection. If you spend too much time overthinking your trades, you’ll miss out on way too many. And remember, it’s those trades you never take that cost you the most $$$. Oh, and if you’re using more than a few technical indicators on your charts, I would suggest you’re overthinking your entire process. KISS (Keep It Simple and Smart). Less is more.
10: You can’t fix a problem if you don’t truly understand what’s broken. Too many struggling traders THINK they have it figure out. All I need to do is fix _____________ and my trading will be back on track. As soon as I _________________ I’m going to be consistently profitable. They probably do need to fix the issue(s) they are aware of but I suggest it’s much more complicated than simply fixing ______________. If you’re not tracking every single trade you take along with every single emotion you have while trading, you’re never going to get it. Why? Simple. You don’t really understand what needs to be fixed. Not to mention writing things down (or typing them into your computer) is proven to help engrain things into your brain. See #8.
11: Bonus spooky habit! Doing the same thing over and over and over again but expecting a different result. Insanity. If what and how you’re trading hasn’t worked in the last day, week, month, year or more, what makes you think tomorrow or next week is going to be any different? It’s not! Instead you should STOP trading, learn some A+ Setups and develop your process. Note: This is very much related to #4. If Day Trading was a “real job” how long would your boss let you get away with what you are currently doing? Why are you (as your own boss) letting yourself get away with it? Too many traders get into a rut and just can’t pull themselves out. Or some just can’t get over the next hurdle. When you get stuck, STOP and ask for help. We’ve all been there.
Please understand this list would have to go to about 100 to include most of the possible habits one needs to overcome to become consistently profitable over the long haul. I personally had to break every single one on this list at some point on my path to profitability. Some were much harder to break than others. The 11 we discussed today are all recent examples we’ve helped traders with since our last class. EVERY trader at some point along their path to profitability must overcome bad habits. It’s all part of developing YOUR process. I’d love to hear about some of the “spooky habits” you’ve struggled with (or still are) in the comments section.
Happy Halloween everyone. Don’t eat too much candy.
Thanks for reading!