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Discover the Process For Eliminating Bad Trading Habits and Replacing Them With Good Ones :

Traders as a whole have innumerable bad habits that they carry out within the market environment. They strategy-hop, refuse to take controlled losses, remove stop losses, take losing trades personally, jump into trades in fear of missing out, hesitate to pull the trigger on good opportunities, blame external forces for their woes, and overall trade against their systems/plans/rules based on their in-the-moment emotions and impulses. Keep in mind that this is just a small list of bad trading habits – a full list could fill an entire book.

how to for the stock market - trading mindset

The common denominator with the majority of bad trading habits is that they undermine a proper, structured approach and distract from the truth. It’s no wonder that so many novices attempt trading for a short amount of time and then come out of the experience feeling confused. But the reason for their confusion is easily explained – trading randomly, impulsively, irrationally, and with an approach devoid of structure is bound to confuse anybody. It’s hard to measure the performance of a specific strategy and refine it when it’s not even being followed. As a result, cultivating patience, discipline, and consistency are critical for long-lasting success.

4 Factors in Eliminating Your Bad Trading Habits:

Below we will discuss the 4 factors in eliminating bad trading habits with common examples and potential solutions. This won’t provide a comprehensive list of bad habits, but can serve as a roadmap for fixing your own ineffective tendencies within the market. If you haven’t already, start with a period of self-observation during live trading. This will allow you to first recognize your own bad habits, and then be able to resolve them. No problems can be solved without awareness, so begin by taking inventory of your own habits.

Typical Trader Mindset

The 4 factors in eliminating your bad trading habits are to make them invisible, unattractive, hard, and unsatisfying.

Make Them Invisible

Bad Habit: Blindly copying/mirroring the trades from a self-proclaimed guru or from a “hot stock picks” newsletter. This may also include impulsively jumping into a trade because the ticker is trending on social media or you were given a “hot stock tip” from a friend or family member. Be careful about who you’re listening to when it comes to tips, guidance, recommendations, and alerts.

Solution: Turn off alerts, unsubscribe from newsletters, and stay off social media while trading. The key is to eliminate whatever triggers you to act impulsively. By avoiding your cues, you can better control your detrimental desires to go against your plans, strategy-hop, jump into random trades out of fear of missing out, etc. The reality is that it’s easier to avoid temptation than to resist it.

Make Them Unattractive

Bad Habit: This is broad and probably includes most of your bad trading habits, but trading against your system/plan/rules in any way. For example, hesitating or altogether not taking signals to enter or exit trades, removing stop losses to avoid being wrong or taking losses, or adding/reducing position sizes on a whim.

Solution: Find at least one accountability partner (sibling, parent, spouse, friend, etc.) and create a “Trading Contract”. This contract must detail your system/plan/rules, and most importantly, your promise to abide by them. If you trade against your system, make it unappealing to do so. You can adjust the terms based on your own personal situation, but create some sort of immediate punishment for violating your rules. For example, every time time you trade against your system, you have to pay your accountability partner $20. Make sure you both manually sign the contract for maximum effectiveness – this makes it binding and more “real”.

Make Them Hard

Bad Habit: Tendency to overtrade or use excessive position sizes. This comes from a desire to be entertained, be in on the action, and have the potential to “hit the jackpot”. This is treating trading more like gambling (a money game) than a mathematics/statistics game.

Solution: Limit your overall portfolio size in order to put a ceiling on the amount of trades you can take and the size of those trades. Even if you have the urge to overtrade or use huge position sizes, the smaller portfolio will hinder your ability to trade out of control. It can also help to keep your watch list short in order to narrow your choices and reduce your impulses.

Make Them Unsatisfying

Bad Habit: Making excuses, blaming external forces, strategy-hopping, attaching your ego to the outcome of trades, and any other bad habits you can think of.

Solution: This works for every single bad trading habit you have. Understand how they’re negatively impacting your results and rendering you ineffective within the market. Attach as much pain as possible to continuing these habits. Think about how much it will cost you emotionally and financially to continue operating this way. How will it impact you and your family? Make the agonizing connection that these bad habits will only lead to negative results.

4 Factors in Developing Good Trading Habits:

Now that you have the tools to eliminate your bad trading habits, it’s time to learn how to develop good ones. The factors are essentially an inversion of what we used for eliminating the bad habits. Instead of making our good habits invisible, unattractive, hard, and unsatisfying, we want to make them obvious, attractive, easy, and satisfying.

The Enlighted Trader Characteristics

At first it might be hard to stick to these good habits because they’re in direct conflict with your strongly imprinted bad habits, but with enough repetition your new, good habits will become dominant and automatic while your old, bad habits weaken and die off.

Make Them Obvious

Good Habit: Mentally and physically preparing for trading (exercise, meditation, creating trade plans, etc.), following your system/plan/rules with discipline, and tracking your trades in a journal (not just the specifics of the trade along with the results, but your thoughts and emotions during the trades as well).

Solution: Have your watch list, trade plans, and specific rules of your system prominently displayed on your desk or the wall next to your computer. Make sure that the environment wherever you’re trading is clean, organized, and free from distraction. Create routines that trigger you to get into the proper mindset before trading. For example, listening to certain types of music, specific songs, repeating affirmations, or reviewing your own personal description of the type of trader you want to be.

Make Them Attractive

Good Habit: Being patient while waiting for opportunities to arise, keeping an objective perspective on the market, and staying structured, disciplined, and consistent in your approach.

Solution: Understand the benefits of trading with a calm and balanced demeanor. Doing so will reduce or eliminate emotional and financial turbulence. Similar to how you made your bad habits unattractive with a “Trading Contract” above, you can add terms for rewarding yourself when you follow your rules and trade properly. For example, you can open or label a bank, PayPal, Venmo, or any other account for your consistent/disciplined trading. Every time you execute a trade according to your system, you can transfer $10 into that account. Again, the terms can be adjusted to whatever you think will be most effective, but this provides a rewards system for trading the right way. The outcome of individual trades doesn’t always reflect trading properly.

Make Them Easy

Good Habit: Staying mentally sharp throughout the trading day, following your system, and sticking to stop losses and profit targets.

Solution: One of the best ways to keep yourself from interfering with trades after entry is to automate your exits through the use of conditional orders. Instead of monitoring your position tick-by-tick, which will almost certainly produce negative emotions like worry, anxiety, and fear, you can essentially “lock-in” future behavior with conditional orders. If the market moves against your position to a certain degree, it will trigger a controlled loss. If it moves with your position, it captures gains at your predetermined profit target. This set-it-and-forget-it approach reduces in-the-moment impulses. It can also help to set limits on the cumulative amount of time you can trade in any given day since your cognitive abilities will diminish after just a couple hours.

Make Them Satisfying

Good Habit: There are far fewer good trading habits than bad trading habits, so it’s getting harder to come up with unique ones at this point. But the essential elements of them are all the same: to keep your mindset aligned with market characteristics, create structure in the form of a system/plan/rules, and have the ability to follow that structure.

Solution: Use visual cues like moving marbles from one jar to another or checking off the box on a calendar any day where you completely stick to following your trading rules. Just thinking back on times when we followed our rules probably won’t bring us much satisfaction, but seeing a visual confirmation of our consistency and discipline can keep us more focused on keeping the streak alive. Remember that we optimize what we measure, so we need to make sure we’re measuring and rewarding the proper process (following our rules) and not the results. After all, losing trades can happen even when you do everything right – that’s just a reality of trading.

Stop Letting Your Bad Trading Habits Wreak Havoc on Your Emotional & Financial Well-Being:

If you’re experiencing financial and emotional agony within the market, then it’s time to interrupt your negative thoughts, emotions, and behaviors, and replace them with better alternatives. Consider making decisions by design – empowering and effective ones that align with your validated system, instead of making decisions by default – controlled by your bad habits, biases, defense mechanisms, impulses, and prior conditioning/programming. The truth of the matter is that operating effectively within the market environment requires a special set of mental skills, and the onus is entirely on you to adapt.

What is Day Trading Psychology

Short-term incentives and punishments can help you start good habits and stop old ones, but your identity is what sustains the change. If you fail to unidentify with your impatient, impulsive, and inconsistent self, then you’ll never fully break free from your bad habits. This is where long-lasting change has to take place. You have to become a new trader – one that is patient, disciplined, and consistent. The best way to do this is to continuously act in a way that aligns with the trader you want to become. The more you build the evidence, constantly casting votes in favor of your good habits, the closer you become to being that person. Over time, your identity shifts from inconsistent, losing trader to consistent, winning trader. This type of mindset work is the foundation for trading success.

Your bad habits are currently weighing you down emotionally and financially, but the less you give into them, the weaker they become.

Learn More in the Trading Success Framework Course

Written by Matt Thomas (@MattThomasTP)

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Matt Thomas

Founder of, Creator of the Trading Success Framework Course & Trading Paradigm Skool Community, and Intraday Futures Trader Using Auction Market Theory & Profiling (Volume & Market Profile).


  • Andy says:

    The psychology and emotions involved in trading are critical. Thinking back, one of my most successful periods in the stock market was after studying O’Shaughnessy’s What Works on Wall Street and working out my own way to implementing the main criteria on a rolling bi-monthly basis. 

    I operated this system successfully for many years. It worked so well that the only thing I needed to check was that the stocks I was buying into really were the ones represented by the symbols and that no erroneous data had found its way into the stock screener I was using. It stopped working well when the free screener I had been using was no longer available and I had to accept one that didn’t quite have the same functionality. 

    Clearly, there was no emotion or judgment at all involved. It was a mathematical system and it worked consistently. I like many of the ideas you have provided here. Especially the rewards and the punishments. This is such an important topic and one so easily overlooked. The problem is that so much of what the general public assumes to apply to the field of trading, as communicated and reinforced by all forms of media, is just plain wrong.

    • Matt Thomas says:

      I really appreciate you sharing your experiences, Andy. I especially agree with one of the last things you shared – that the general public doesn’t really understand what it takes to be a great trader. Even the majority of those actively trading don’t understand it because they’ve been fed the wrong information from a variety of sources.

      There’s all kinds of information shared about trading in books, websites, courses, newsletters, etc. But knowledge alone doesn’t necessarily equate to trading success. Learning technical & fundamental analysis, various strategies, and all kinds of financial terms can help, but without the proper mental framework, your process will always be highly susceptible to self-sabotage. Inconsistency will plague trading operations until mindset is solid. Our subconscious and self-image have a huge impact on our trading results. It’s not the super exciting thing that people want to hear. They’d rather hear about “foolproof systems” and “explosive profits” – but all of that just distracts them from what really matters.

      In the end, it’s really not a surprise to me at all why so many traders fail. Most people choose to either avoid trading altogether or pay thousands of dollars for programs that promise hot stock alerts and huge profits. Then they jump into the market and end up losing thousands more because they’re completely unprepared mentally. Instead, they could start with a relatively low-priced mindset course like The Advanced Traders Mindset Course or The Trading Psychology Mastery Course, and actually learn the foundation required for trading success.

      People take the ineffective path because they want a shortcut, while avoiding the effective path because it doesn’t seem nearly as exciting. But what’s more exciting: short-term emotional gratification or long-term trading success? That’s the choice traders have to make right from the start (usually unknowingly) – and about nine out of ten of them choose the short-term emotional gratification, sacrificing their ability to achieve long-term trading success.

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