Too many new traders think that being successful in the markets boils down to having the “right strategy.” It’s true, if you’re trading a strategy that doesn’t have an edge, you won’t make money in trading. However, have you ever notice that some traders use chart patterns to generate ideas while others might focus solely on news or fundamentals?
You see, there are a number of different styles of trading that work in the market, but the one thing that successful traders have in common is that they’ve developed winning habits. Whether you’re a beginner trader or a seasoned pro, developing healthy habits is how to become a better trader. No number of “X Tips to Become a Better Trader” articles will help you if you don’t develop the habits that have allowed the most profitable traders to find success. Here are four tips you should follow to find your own success as a better, more efficient trader.
4 Daily Habits to Make You a Better Trader
How do you start the trading day? Do you log on to your computer for a couple of minutes before the market opens? Are you multitasking, chatting with friends, writing emails, having one eye on the markets and another on something else?
Successful traders are up early in the morning. They are checking the foreign markets to get an indication of how the U.S. session might open up, running through headlines, seeing what companies have been upgraded/downgraded, and looking at the corporate and economic calendar. Websites like Econoday offer a free economic calendar that makes it easy for you to keep up with events.
If you’re someone who trades volatile stocks or you have an event-driven strategy, Yahoo Finance offers a solid earnings calendar. Additionally, you could use EarningsWhispers to stay up to date on earnings announcements.
Utilize the internet tools at your disposal to streamline your morning routine. Part of becoming a better trader is simplifying your day’s to-do list in order to focus on what matters most — profits. Keep thorough notes of your days of work and the outcomes of those days. If you want a tip on how to be a better trader, it’s this — consistency is key. Stay consistent by developing and fine-tuning your morning routine.
Of course, if you primarily base your trades off chart patterns, you’ll want to review your charts for potential levels of entry. Create a list of possible names that you’ll be trading for the day. As you can see, if you’re just turning on your computer minutes before the market opens, you’re doing yourself a disservice. The best traders set themselves up for success — starting with preparation.
Track Your Inventory
If you’re a store owner, it makes sense to track what your best and worst selling items are, as well as your profit margins. You should view your trading similarly. Know what your best trades are and keep track of those profit margins. For example, is it a certain catalyst that you trade well? Is it chart pattern or sector that brings you the most profit?
The only way you can figure this out is by reviewing your trades and journaling your performance. After you have a grasp of your strengths and weaknesses, simply focus on what you do best and eliminate the stuff you do poorly.
Some traders will use services like Evernote and Google Docs to keep their trading journal. However, an old-school notebook will work if you prefer using pen and paper. The most important thing is to study your trades to identify your strengths and weaknesses.
One of the best ways to become a better trader is by talking to better traders. Seek out other professionals to get another pair of eyes on the world of trading and expand your horizons.
The best traders are not doing it alone. They usually work in teams, exchanging ideas and feedback with each other. Back in the day, this meant you had to join a prop firm and move to one of the big trading cities like New York or Chicago. However, in the modern era, it doesn’t matter where you live. All you need is an internet connection to join a trading chatroom to gain access to hundreds of traders. Moreover, it helps to learn from people who are experienced traders.
You can learn a lot by asking questions and teaming up with other like-minded individuals. Whether your goal is to increase your trading size, learn a new strategy, or better handle your emotions — communication will help you get there faster. Joining a trading community is one of the best investments you can make for your trading business.
Treat Yourself Right
When money is on the line, it’s hard to keep your emotions in check. It requires focus and mental clarity. After all, trading is simply high-level decision making. If you’re not getting enough sleep, eating poorly, and not exercising, it will eventually catch up with you. Start putting your health first.
Losing even 1-2 hours of sleep a night can have heavy consequences, lowering your ability to function as if you haven’t slept for a day or two. Think about what it can do for your focus. It’s been estimated that sleepiness is the cause of over 100,000 driver accidents each year.
Want to boost your trading performance? Start exercising. Exercise produces endorphins which can act as a natural painkiller, as well as improving your ability to sleep and reducing stress.
What you put in your body can also affect the way you trade. Food has a direct impact on cognitive performance. Consider adding more fruits and vegetables to your diet, as they’ve been proven to enhance mental performance.
The Bottom Line
The bottom line of all this is to become a better trader, you need to develop habits like these to stay effective and on top of your game. Simple habits can be formed in as little as 21 days. However, more complicated habits take longer to form. Be patient, enjoy the process, and watch your net profits grow. As you move along your journey as a trader you’ll learn that it’s a lot more than just having the right strategy. Follow these daily habits to become a better trader, and you could be well on your way to the path to success.
Jason Bond runs JasonBondTraining.com and is a swing trader of small-cap stocks.