5 Tips To Develop Better Trading Habits

7 min read

Imagine the following scenario: you’re starting the year, completely motivated. This is going to be YOUR trading year! This is the year where you will make it happen.


When you look at your trading, a few things need to be fixed, though. You know you should start a trading journal. You need to stop revenge trading. Cutting losses is still hard to do. And really, your trade management is pretty subjective so your trading plan needs some work.



You need some solid trading habits but more importantly, you need to look at ways to stick to those newly created habits. Everyone who has ever tried to lose weight, stop smoking or exercise knows this all too well:


It’s easy to start a habit but harder to stick to it


That’s why I have a number of tips to make sticking to your trading habits much easier. They work for me and I believe they can help you too in creating solid trading habits that can improve your trading.


So without further ado, here are 5 ways how to develop good trading habits AND stick to them. Let’s get started!



1. Start Small


When I initially considered journalling my trades, I didn’t start out with a very advanced solution. I simply had a notebook where I wrote the details of the trade down in about two lines. That’s it!


“Make it so easy you can’t say no”


That doesn’t mean it was sufficient in all scenarios but here’s the thing: it’s a start. As far as time commitment goes, this would just take one minute after every trade. It was easy to do and the change in my routine was minimal. But it was a start and from there, I kept tracking more custom data and moved to Evernote, Excel, Edgewonk and my own journalling program but because every time, the incremental change was small, I stuck to it.


Start small and work in incremental steps. It’s much more likely that you will be able to stick to the habit if the impact on your life is as minimal as possible. James Clear talks about this in his excellent book Atomic Habits.


Similarly, I started with a trading plan that was just two paragraphs. It listed what I wanted to see before I got into a trade. Was it a complete trading plan? Hell no! But it was the start of a document I ended up working on every weekend (another habit!) until it contained everything it needed.



2. Why, How, What


Whenever I want to include a habit in my trading routines, I always start with writing down the answers to the following three questions:



1. Why do I want this habit?


This is the most important one. The why is the purpose. You need to understand why you want to adopt a habit into your trading routines. If you don’t clearly understand why a specific habit is good to have, you won’t have the drive to actually see this through and instead, you’ll be likely to give up at the slightest challenge you encounter.


Defining why you want something is a great way to remind yourself what you want to fix in the first place. Think in terms of the benefits you will get when you actually do this habit consistently.


Simon Sinek has a great TED talk on why the WHY is so important.



2. How am I going to accomplish this?


You need to have a plan of action on how to bring this habit into your life. The how is the process. Especially this answer should be written down instead just thinking about it. Writing down helps with formulating a plan and you’re more likely to stick to something if you have written it on a piece of paper.


Don’t just list how you are going to accomplish this but also the potential challenges you will encounter, what will make it more difficult to stick to the habit and how you can remove friction in order to achieve what you want.



2. What should be the end result?


In order to validate if something is effective, it’s also important to think about what you want to accomplish. The what is the result. Being clear on what you want to want is a step people often skip. You should be able to clearly define the habit in the most detail possible.


Be specific in this step! It’s not enough to say “journaling”. Think about the data you want to keep track of. Instead of saying you want to be less emotional, describe the specific emotions and how they personally affect you.



3. Remove Friction


Whenever I think of adopting a new trading habit, my first thought is not about the new things I need to implement to make the habit a part of my life. It’s always how I can remove any friction so following this habit becomes the easiest it can possibly be.


Friction is when you’re too tired to update your trading journal in the evening. Removing friction is to do your journaling first thing in the morning when your energy levels are still up. A runner might put sports gear next to his bed to make it easier to go for a run. Similarly, I will put my headphones on my desk so I can easily meditate using Headspace in the morning.



Removing fiction means having fewer obstacles to accomplish your habit. This can be done by removing steps to reach your goal or by simplifying the process as a whole. While there are many different types of friction, let’s go over the most important ones:


  • process: too many or too complex steps to accomplish something
  • knowledge: not understanding something well enough
  • technology: tooling, applications and technology that are overly complex
  • change: favouring the status quo and resisting all types of change



Here are a number of ways to remove this friction in your trading:


  • Reduce the amount of charting programs, software and indicators you use
  • Deliberately block time each day to spend on trading
  • Do things at different times of the day
  • Use automation to prevent execution errors
  • Set an alarm to journal your trades every day
  • Stick a trading checklist to your monitor or wall
  • Read a book on trading psychology to better understand your emotions
  • Have a spreadsheet that automatically calculates your stop loss



4. Automate


“Civilization advances by extending the number of operations we can perform
without thinking about them.”

– Alfred North Whitehead


Automation is one of my favourite ways to make things easier for myself! I use automation extensively in my trading, from automated spreadsheet calculations to expert advisors that enforce my rules for me.


Automation, when done right, is an obvious way to reduce friction and make it easier to implement new trading habits. It enforces discipline in sticking to a habit since often, automation moves the decision-making process from the person (you) to the automated component.


Expert advisor trailing stops code


It can be as simple as using alerts instead of manually tracking the price charts. Or automatically having your position size calculated or automating a complete trading strategy. Automating will often simplify starting a new habit. If you want help with automating (parts of) your strategy, feel free to get in touch.



5. Write Things Down


Finally, simply writing things down might be the biggest secret to sticking to a new habit. Whenever you adopt a new habit, write down a list of the things you need to do in order to achieve that habit. Chris Sauve, a technical lead at Shopify, gave a TED talk on the habits of highly successful people. The number one habit was, you guessed it, to write things down.



Why would the successful people do this? It turns out that by writing down things, you remember them better. Not only that: if you make a checklist of the things you need to do, you’re actually more likely to do them. Our minds simply find it extremely satisfying to check off another item on your list!


Now, writing things down doesn’t necessarily mean literally picking up a pen and paper. It’s about making notes of your habits in whichever way that works for you. Other ways to help you stick to the habit is to make calendar items every day to remind you, use apps like Streaks to help keep a habit, making a plan in a notebook or creating a daily to-do list. Anything that can help you keep a habit will work.





Great habits are the cornerstone of a great trader. It’s one thing to start a habit but what really sets the best traders apart from the rest is that they know how to stick to those habits. This allows them to continuously improve and leverage the benefits of compounding in their trading.


So sticking to habits is the key. But how can we do this? Turns out that by following 5 simple tips, you can make even the most challenging habits stick:


  1. Start Small
  2. Why, How, What
  3. Remove Friction
  4. Automate
  5. Write Things Down


If you’re struggling to stick to your trading habits, check out my Trade Advisor program. In this program, you learn to trade a solid trading strategy from the ground up and we focus on good habits day in and day out.


What are your tricks to start a habit and stick to it?

Let me know in the comments!



FX and futures trader, using price action, market profile and order flow to trade markets. I also have an interest in trading psychology and algorithmic trading. Follow me on Twitter: @GhostwireTrader