Almost all of our negative behaviors are the result of habits that we have built up over the years. These are the gremlins in our trading psychology that cause us to lose money.
The older you are, the more deeply engrained those habits become.
But can you really teach an “old dog” new tricks?
Of course.
It has been proven that a healthy brain has neuroplasticity, or the ability to change. One of the most effective ways to create this change is to leverage the power of rewards.
In this post, I'll share with you why rewards work and and the exact process that can be used to achieve your trading goals. Then I'll give you some specific tools that can help you stay on track with your goals and rewards.
Why Rewards Work
In a word, rewards work because of:
Dopamine
Your brain feels good when it gets a rush of dopamine. Or more accurately, you feel more motivated to do a certain action when you get a hit of the big D.
People usually talk about dopamine in the same sentence as sex, drugs and/or rock and roll…
But dopamine isn't only released during pleasurable experiences. It is also released during stressful experiences and during seemingly mundane events like checking your Facebook feed.
This means that your brain can actually feel good, even when you're engaged in behaviors that are not good for you.
Over time, you can become addicted to these states because they make you feel good on a subconscious level and…
Violà, you have now formed a habit.
…and they are a bitch to kick.
That's why we have all worked with someone who goes cray-cray when the printer jams…
…or we have a friend who looks at two hot naked women covered in ice cream and thinks twice about joining the threesome because of the calories in the ice cream.
These people actually feel better when they are worried or stressed.
We all do this to a certain degree.
So in order to consciously reprogram ourselves to do the actions that will help us reach our goals, we want to engage the positive powers of dopamine.
Step 1: Create a List of Things That Will Make You Happy
Some people recommend setting your goals first, then attaching rewards to them.
I personally believe that it's much more practical (and fun) to start by creating a list of things that you would enjoy having or doing.
This detaches the goal from the reward and allows your mind to wander and be creative. When you are worrying about how you will achieve your goal, you can get bogged down in limited, overly-logical, left-brain thinking.
…and that can limit your ability to get in touch with the rewards that will truly make you happy.
Having trouble coming up with a list? Think back to when you were a kid and all the fun stuff you did, or wanted to do.
Talk to your inner child.
If you find yourself trying to decide if you should add a reward to your list or not, then it's an automatic no.
Actually, it's fuck yes, or no. You should be super excited to earn your rewards, so you will do whatever it takes to overcome the inevitable obstacles that will get in your way.
Your rewards don't have to be material objects or expensive. They can be simple pleasures that give you the vital dopamine hit that you need to stay motivated.
For example, one of my favorite rewards for working out and meditating in the morning is to sit in the jacuzzi for a few minutes. I really enjoy it and that alone will motivate me to do my morning routine.
I have found it useful to break up my rewards into 5 categories:
- Simple
- Small
- Medium
- Large
- Baller
You might want to use fewer categories…or maybe add more. Figure out what works best for you.
In the next sections, I have provided some examples of rewards that might fall into each category. I have also listed some rough dollar costs for each category, but that will be relative to your income level, so adjust accordingly.
Use this list as a starting point to create a rewards list that gets you excited to reach your goals.
Simple Rewards
First, start with some simple rewards that will be used to reinforce your daily habits.
I notice that a lot of goal setting programs don't encourage you to set rewards at this “low” of a level. But when you start to reward yourself for as many positive actions as possible, that's how you can build momentum very quickly.
Here are some ideas for simple rewards. Generally the price will range from free to a few dollars.
- Relax in the jacuzzi or sauna
- Order your favorite tacos
- Go on a bike ride in a scenic place
- Quit work on time, lie in the sun and read a book
- Watch that movie that you have been wanting to see on Netflix
Small Rewards
Next, create a list of rewards that will apply to slightly larger goals. If I were to put a price on these rewards, it would range from free to around $25.
This could include things like:
- Buy that new t-shirt that you have been wanting
- Take the day off and go for a long hike
- Get that Kindle book that you have been wanting to read
- Share a nice bottle of wine with some friends
- Try out some blue light blocking glasses to reduce eyestrain during trading
Medium Rewards
Now this is going to be the bread and butter of your rewards list. The previous categories were fun little ways to keep you motivated, but this is where the rewards start to get exciting. Consider rewards that range from $25 to about $200.
- Take your family out to dinner at a restaurant that you have never been to before
- Make a generous donation to your favorite charity
- Buy new running shoes
- Go ziplining
- Get a 90-minute massage
Large Rewards
These rewards are for your primary goals, the goals that you will strive for every quarter or year. When you reach these goals, you may want to reward yourself with something between $200 and $2,500.
- Get a new Mac trading computer
- Stay at an ice hotel
- Buy a new surfboard
- Finally get some Bose noise-cancelling headphones
- Take your family on a weekend vacation
Baller Rewards
Here are some ideas for when you reach your life's grandest goals.
- Buy a plot of land for your dream home
- Drop a down payment on the Tesla Roadster
- Stay on Necker Island
- Rock a new Panerai
- Get an Icon A5
Step 2: Now Set Your Goals and Attach Those Rewards
In China and Japan, the number 4 is considered bad luck because it has the same pronunciation as the word death. Hotels skip the number 4 when numbering floors, athletes avoid choosing it as their number, etc.
It's like the number 13 in other countries.
I mention this because it will help your remember not to set more than 3 primary goals at a time. Obviously, you won't die if you set more than 3 primary goals.
…and there's no such thing as bad luck.
But it could mean the death of your goals if you stretch yourself too thin. The fewer primary goals you focus on, the more likely you will be to accomplish them.
So start from the top down and work your way backwards.
Remember that you will work harder for goal if you have a big enough “why” behind it. So don't just focus on reaching a goal because other people will think that it's cool.
Ask yourself why it's meaningful to you.
Then state all of your goals in the present, as if they have already been achieved and state everything in a positive tone.
Lifetime Goals (Baller Level Rewards)
Here's where you go big. Some of your lifetime goals may include things like…
- I have a lot of fun working with the people at the hedge fund I started
- I am grateful for all of the time that I can spend with my young children
- I get a lot of satisfaction out of building schools in developing countries around the world
- I enjoy living in my custom-built home
- I loved living in Tuscany for a year
Primary Goals (Large Rewards)
Now set the primary milestones that you want to complete within 3 months (there's that number 3 again). These are the tangible steps that will get you closer to your lifetime goals.
- I trade for a hedge fund (or have amazing investors)
- I had a great trading year, with only 2 losing months
- I journaled all of my trades, on time, for 90 days straight
- I journaled all of my missed trades for 90 days straight
- I created an automated trading program that makes consistent monthly gains
Secondary Goals (Medium Rewards)
These goals will help you reach your primary goals. They might include things like…
- I backtested the _______ trading strategy on the 30 currency pairs that I trade
- I learned so much by going back through all of my trades from the past year
- All of my trades during a 1-week period have a rating of 9 or better
- I studied 5 trading strategies that are similar to the strategy that I'm currently trading
- I signed up for a course to learn a new trading strategy
Action Steps (Small Rewards)
These goals roll up to your secondary goals. You might consider goals that look like this…
- I finished backtesting the EURUSD daily chart with the ______ trading strategy
- I talked to at least 20 potential investors this week
- I worked on my trading robot for at least three hours this week
- I setup Evernote to use as a trading journal
- I learned how to use Forex Tester
Daily Tasks (Simple Rewards)
Now break your action steps further into daily tasks.
- I update my trading journal on Fridays
- I scan for potential trading opportunities on Saturday afternoons
- I meditated this morning
- I checked the charts every 4 hours today
- I checked today's news events
Once you have these goals set, then assign a specific reward to each one. Make this process fun and you will be much more likely to do it.
Step 3: Remind Yourself of Your Rewards and Goals
Once you have your goals and rewards written down, it can be easy to breathe a sigh of relief and set your list aside…never to be seen again.
Just like your New Year's resolution to go to the gym 5 times a week.
So now you need to create mechanisms that will remind you of your goals and rewards on a daily basis.
Here are some of the 3 most effective tools that I have found to regularly remind myself of my goals and rewards.
Start a Success Journal
First of all, forget the idea of using an app on your computer or smartphone to track your goals and rewards because…
…that bastard is trolling me on Twitter again.
…yay, someone just liked my last photo on Instagram.
…wait, my wife is calling.
There are just too many potential distractions on your phone. In addition, for many of us, our habits make us check certain apps as soon as we pick up our phones.
You pick up your phone, and 45 minutes later you realize that you have been scrolling through Facebook the whole time, when you were supposed to be reviewing your goals.
When you use a paper notebook and pen, this forces you to get away from your electronic notifications and focus on the task at hand.
It has also been proven that writing can help you retain more information and make you 33% more likely to reach your goals, compared to typing on a computer.
However, setting up and tracking your goals and rewards can be pretty daunting because there are so many pieces to track.
The best solution that I have found is called the Best Self Journal.
It's not quite perfect, but it is the most useful journal that I have discovered for tracking goals and rewards.
Learn more about the Best Self Journal here.
Create a Mind Movie
A Mind Movie is a vision board on steroids.
This website allows you to easily create goal visualization videos by uploading pictures, music and videos. You can also add your own text to each segment.
If don't have any of these assets, then you can choose one of their stock photos, videos or music. You can even insert YouTube videos, as long as they are licensed for public use.
When you watch your Mind Movie daily, it can help you stay excited about your goals and rewards.
The fact that there are moving pictures and music makes the movie much more engaging than a static board that hangs on your wall and is much more likely to activate an emotional response…which is ultimately what you want.
To learn more about Mind Movies, go here. I use it to create movies that get me excited about my goals and I watch my movies at least twice a day.
Here's a demo video. Yeah it's cheesy, but it gets the point across.
I'm sure you can make movies that are way cooler 🙂
You can also make your own movies with something like iMovie.
Regardless of what you use, pick something that works for you and just get started.
Keep Your Primary Goals Where You Can See Them
Finally, it's useful to post your primary goals in places where you will see them all the time. Simply write your primary goals on a notecard or sticky note and post it in places like:
- The front of your notebook
- Your bathroom mirror
- Your computer monitor
- The wallpaper on your phone
This will build a small habit of constantly thinking about your goals and help you focus on what needs to be done to achieve them.
Final Thoughts on a Trading Rewards System
It can be tough to maintain a rewards system in the beginning. You may go through a few starts and stops before you get it to stick.
Many of our negative habits have been built up unconsciously over a lifetime. It will take a little time to overcome them and install those good habits.
So be patient, and forgive yourself if you get off track.
Then jump back on the horse and start again.
What are some of your favorite ways to reward yourself for a job well done? Share your best ideas in the comments below. Someone else might like it too 🙂
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