How to Identify, Understand, and Replace Bad Trading Habits

by | Feb 23, 2023

Bad habits can be the biggest enemies of an up-and-coming trader.

If you do the wrong thing and get lucky, you might experience misplaced positive reinforcement, causing you to think a bad habit is a good one.

And while unlearning bad habits can be challenging, it’s certainly not impossible…

Here are a few simple strategies I’ve learned over the years that can potentially help to eliminate your bad habits:

Identify the habit: The first step to unlearning a bad habit is to identify what it is. Take some time to reflect on your recent trading performance. Do your best to pinpoint the habit that is holding you back.

Understand the habit: Once you’ve identified the habit, try to understand why you do it. Is it a response to stress or anxiety? Does it provide a sense of comfort or familiarity? (WARNING: If you don’t understand your bad habits, you’ll never break them!)

Replace the habit: It’s difficult to overcome a bad habit without replacing it with something else. I suggest identifying a positive action that you can substitute for your bad habit. 

Today, I’ll break down some of the most common bad habits I see my students displaying.

Then, I’ll detail how you can potentially remove those negatives from your trading.

Keep reading and I’ll show you…

Bad Habit #1: Focusing on Short-Term Gains

While I’ll admit that day trading is mostly a short-term game, that doesn’t mean you should only strive for short-term gains.

This is especially true for options traders…

Focusing on short-term gains can lead you to take on too much risk, or make impulsive trades that don’t align with your long-term goals

Even if you’re trading short-dated contracts, you should always have your overall trading journey in mind when making any major decisions.

Ask yourself…

Am I making this trade to bag some quick gains or to build my account? Does this play fit my long-term strategy? How will I justify this decision to myself if the trade goes south?

You must be able to answer these questions honestly before entering any setups.

Bagging a quick gain on a sketchy play can be satisfying, but it can also lead you down a path of bad habits. 

Plus, worrying about short-term gains can create a domino effect, potentially leading you to the next bad habit…

Bad Habit #2: Chasing Performance

Some traders seem to only care about their profit and loss (PnL)…

In other words, they chase performance as opposed to focusing on achieving mastery.

This bad habit is closely related to focusing on short-term gains, except those who chase performance care only about their overall % gained or money earned.

Could this be the end of Elon Musk?

He’s made a drastic mistake nobody could’ve seen coming…

But it could open the profit floodgates in one little-known stock.

Traders who chase performance often try to scalp the hottest stocks or follow the latest trend. 

But by doing so, you’re far more likely to end up going long on an overextended chart that’s moments away from total destruction … or shorting a name that’s already been decimated. 

(Example: All of the newbies rushing into overcrowded artificial intelligence stocks this year…)

This can lead to buying high and selling low, as well as missing out on potential opportunities that aren’t being shilled on social media every 20 minutes. 

Chasing performance can cause you to make impulsive trades, ignore your risk management rules, or ignore your overall game plan.

So, instead of worrying about your PnL … focus on building a consistent, long-term strategy.

If you can do that, your PnL can potentially improve tremendously without having to chase your performance.

Bad Habit #3: Unproductive Self-Evaluation

Self-evaluation is an absolutely critical skill that every aspiring trader must harness to their advantage.

But not all self-evaluation is created equal. You can easily psych yourself out by approaching it the wrong way.

Let me explain…

When evaluating your trading performance, you need to be honest with yourself.

Identify the trends in your wins … and even more importantly, in your losses.

Over time you’ll get a better understanding of how different factors affect the ultimate outcomes of your trading decisions.

But what I don’t want to hear from Evolvers is negative self-talk. Don’t let yourself entirely off the hook, but also don’t beat yourself up when you’re not trading your best.

If you’re too hard on yourself, you run the risk of damaging your (naturally fragile) confidence.

I’ve been there myself many times before. I lean toward being too critical of my trading performance…

In the past, I’ve missed big opportunities (or mishandled trades) because I was beating myself up and damaging my confidence

For example, in March of 2022, I lost $60,000 trading AMC Entertainment Holdings Inc. (NYSE: AMC) puts because my confidence was shattered following another poor trade on Tesla Inc. (NASDAQ: TSLA).

On the other hand, had I been more productive in identifying my mistakes, I might’ve avoided that huge loss entirely.

Final Thoughts

The best traders I know have a strong work ethic, forward drive, and ability to productively self-reflect…

They’re skilled at looking back on their trading and removing the mistakes that led to losses.

By doing so, they can identify their bad habits and eliminate them for good

And now, it’s time for you to do the same.

Meet Mark:

Mark Croock is a former accountant who after studying under Millionaire Trader Tim Sykes turned his small account into $4.11 million in trading profits by applying Tim’s strategies to options trading.

He started Evolved Trader to pay it forward and help other traders learn how to leverage options


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