Trading isn't like a regular job.
More time in front of the screens does not translate into more money. In fact, unless you are daytrading, the opposite is usually true.
Of course, this means that you will have to be really patient and wait for the best setups.
Easier said than done.
If you have been sitting at your trading desk for a couple of hours, it can be tempting to start “inventing” trades.
As you know, that never ends well.
So, if you have a trading method that you have tested and has positive expectancy, then your biggest challenge is to stay out of trouble during trading hours. Here are seven things that you can do that can do to keep yourself from taking dumb trades.
1. More Backtesting
If you have a technical trading system, then I believe that your time is best spent backtesting your system or working on new systems. This is a great way to get the “I need to trade” feeling out of your system, so you don't blow out your live account.
Even if you are happy with your current system and aren't looking for a new one, then practicing your current method can be a great way to possibly make it even better. You might uncover a great optimization or money management technique.
“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”
– Bruce Lee
So even if you think you have your trading method mastered, there is usually some room for improvement. If nothing else, you will keep your skills sharp, just like any professional athelete.
A lot of the best traders that I have interviewed do it. What are you waiting for?
Another activity that can keep you out of bad trades is journaling. There are many different ways to journal your trades, so find something that is simple and effective for you.
Some of your options are:
When journaling, keep the end goal in mind. What do you really want to accomplish with your journal?
For example, if you simply want to see before and screenshots of your winning trades versus your losing trades, then you can use something like Evernote to create before and after screenshots. Just tag your trades as “winning trades” and “losing trades” and you can filter them by tag later and go through them.
I've seen several people try to tackle creating a commercial trading journal and they usually make it way to complex. They geek out on minor details that only matter to a small population of traders.
So keep it simple and only input the information you need, nothing more. The easier it is to do, the more likely you will be to do it.
3. Something Totally Unrelated
Trading is an interesting and engaging activity. So much so that it can take over your life.
When that happens, you can start to lose perspective and possibly burn yourself out. To prevent yourself from going down that dark road, try picking up a hobby that is totally unrelated to trading.
Maybe you can learn leatherworking or programming. Build a robot or be like Fat Bee Trader and build a new trading computer.
Keep it fun and interesting, and you might find that having a diversion keeps your mind sharp and prevents you from falling into a routine. Get in touch with your inner child again and play!
4. Video Games / Movies
Hey, you are in front of your screens anyway, why not watch a movie or play some video games. This will keep you at your desk, so you can still keep an eye on the charts, but it will also prevent you from getting too involved in the charts.
Of course, you could get too distracted and miss trades. So figure out if this strategy is right for you or not.
Although many parents (like mine) have warned of the “dangers” of video games, research is now coming out that gaming can have some positive effects also. In fact, they may even help you learn faster.
Ever hear of the Tetris Effect? It can actually help rewire your brain. Read more about it here.
So give it try. It's a good excuse to buy an Xbox, especially if you don't have kids 🙂
5. Learn a New Language
Another activity that can be done at your trading desk is to learn a new language. It's useful for when you become location independent and travel the world.
On top of all the trading gear you will need to bring along, knowing the language of the place you are going to visit can be one of the most useful things you can have.
…and it's fun!
6. Get Some Exercise
It can be easy to forget to exercise when you are trading. But it is key to success in any area of life.
When you are in good shape, your mind is clearer and you are more able to deal with the stress of everyday life. Richard Branson lists exercise as a key to his success. As a guy who has built eight separate billion dollar companies, I think he knows a thing or two about what works.
Again, start slow and keep it simple.
Our natural tendency is to go balls out and try to get results immediately. Then you burn out or worse…get injured.
Just start with a few minutes of exercise every day. You can workout outside (like my wife does) or you can get a gym membership.
If you are in the US and near a Planet Fitness, I would highly recommend it. It's only $10 per month…so worth it.
Meditation is something that the top traders and successful people in the world do.
So what are you waiting for?
Everyone from Oprah to Hugh Jackman meditate and list it as one of their keys to success.
Research has shown that meditation actually physically changes your brain. It's not just a psychological thing, the changes can actually be seen.
If you want to see the results for yourself, you can try something like the Muse headband to measure your results. I also recommend trying something like Holosync, which uses binaural beats to put you in a meditative state.
In my opinion, the ultimate benefit of meditation for traders is that it helps you take a step back and look at your trading from a more objective point of view. That certainly helps when you want to stop taking dumb trades.
Final Thoughts on Not Taking Dumb Trades
So those are a few things that you can do to stop taking dumb trades. Some of them may be a little counterintuitive, but give them a try and see what works best for you.
They can all help you stay out of trouble.
…and sometimes, that's half the battle.
What do you do to keep yourself from taking impulsive trades? Leave a comment below…
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