The common sequence I see from traders is below.
Losing Traders: Impulse → 'Trade' → Repeat
Winning Traders: Impulse → 'Wait'
Breaking your trading rules is a bad habit to develop.
Especially when it works out well in your favor.
This eventually causes you to:
- Spiral out of control
- Become reckless
- Destroy your account
It only takes one moment of impulsiveness to destroy weeks, months, and years of hard work. This is why most traders are blowing up constantly because they don't have a process in place to stop an impulsive trigger in the moment.
They are just on autopilot creating a perpetual sabotaging process and no clue on how to stop it.
So the first step is simply to gain awareness. This can be done by journaling the moments where you have these triggers that ruin your results. This may be painful as you will most likely be recording after the fact.
But as painful as this is you must start logging your painful moments so you can create the awareness of the problem and then when you gain awareness, you can then begin to create self-awareness in the moment.
If you want an easy way to track your emotions, maybe take a look at my 'Emotional Tracker' Which makes this process much easier and painless.
Once you have created self-awareness of the problem, you can then use techniques to prevent, reframe and remove yourself before the sabotage has a chance to take over.
Here is one simple technique you can start using:
A simple method for when you feel you are getting impulsive:
- Stop and take a deep breath
- Count back 5,4,3,2,1
- Speak out loud why it's a bad idea
- Count back 3,2,1
- Then walk away
What this does:
- Forces you to 'stop'
- Slow yourself down
- Reframe with logic
- Remove yourself from the environment
Using this method creates the vital seconds needed
You are creating a 'pause’ in between impulse & reaction
Instead of: Impulse > Reaction
It's now
Impulse > Pause > Reframe > Remove
When you use this method you are creating control, with the control you create empowerment. With that, you gain confidence and confidence is vital to trading success.
I also want to just go over the very last step of the process and explain more clearly what is actually happening as it may go unnoticed.
When you count down from 3,2,1. On the 1 you have to make it a rule to walk away straight away as soon as you hit 1. This is because you are focusing on creating a reaction that must be made into a habit. You are making a non-negotiable rule or contract with yourself that on the 1 you must remove yourself. This part of the method is the most important.
In the back of your mind when counting down you must have this thought at the forefront of your mind that on 1 you are done. If not then the previous steps are meaningless.
Conclusion
A simple but powerful method to stop you in the moment from making an impulsive and emotional trading mistake!
If you enjoyed this & want to learn more tips like this go grab my book ''The Blueprint To Trading Psychology.'' were I go into much more detail on the psychology side of trading.
Hope you enjoyed this method and hope it helps!
Speak soon,
Alan aka The Divergent Trader
Rule-Based Price Action
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