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How to Change Your Worst Trading Habits in 3 Easy Steps

Stick that mug of yours in front of the mirror and ask yourself, honestly…

“Am I a trader – or a gambler?”

Good traders win consistently. Gamblers don’t. And today you’re going to learn three steps to becoming a consistently winning trader.

I’ll reveal some of the worst trading habits I’ve seen. And I’ll show you how to fix these serious problems in just three simple steps…

I’ve spoken with countless traders in my time—from pros to wannabes. And the gamblers outnumber the consistent winners 10-to-1. Sure, gamblers can make hit it big with just one bet. A gambler might even catch a hot streak and double his trading account in a matter of months…

But if you asked that same gambler to maintain his successes while limiting his losses (or to consistently grow his account year after year) he’d fail 9 times out of 10. That’s just one of the inconvenient truths in this business.

And if a gambler’s lucky he’ll figure it out before he ends up sleeping on a pile of old newspapers under the Atlantic City boardwalk.

But before we get to step one, there’s something you must know…

Gamblers trade out of greed – and fear. They follow hot stock tips and their gut instincts, not facts and research. And they hold onto losers far too long because of ego or blind hope.

If you find yourself doing this — constantly dealing with knee-jerk, mistimed and unprofitable trades, you need to make a change. You’ve already experienced the most painful lesson: losing money. Now it’s time to turn your fortunes around.

So to become a consistently winning trader, change your thinking with these three simple steps:

  1. Don’t place a bet. Execute a trade.

First you have to eliminate the gambler’s mentality from your trading routine. In roulette, a gambler places a bet and hopes it turns out.

But a successful trader doesn’t bet on stocks. He assesses the possible outcomes and trades with a plan. This plan should include best- and worst-case scenarios. These are your stop losses and profit targets. When a stock reaches your maximum acceptable loss you sell. When a profit target is reached on a short-term trade you sell.

Having a set of rules and following them to the letter will keep painful losses to a minimum. It’ll also force you to take money off the table when you should. That way winning trades don’t become break-even or losing trades because you decided to “let it ride.” Take profits when your analysis says to and sell when a trade moves against you. And never change the rules on the fly.

  1. Understand how timeframes affect your trades.

The gambler will jump on any old hot stock and attempt to ride it to new highs. What he doesn’t realize is how timeframes play a role in his trading decisions.

Here’s a helpful tip: The shorter the timeframe, the less predictable the price. Unless you’re experienced with very short-term momentum strategies, don’t waste your time day trading. Not only that, most of your daytrading profits will probably disappear to slippage and commissions. It’s like tipping $20 for every $6 drink you guzzle at the blackjack table…

And when you’re looking to trade a hot stock, it’s always a good idea to widen your scope to determine its primary trend.

That way, you’re not trying to buy a sinking stock that’s temporarily riding higher on a countertrend rally. There’s nothing worse than buying into a quick rally that immediately fizzles out…

  1. Don’t trade without an edge.

Successful traders know their strengths and weaknesses. And they stick to what they know.

And guess what? If a trader can’t find an advantage, he doesn’t trade. No one’s putting a gun to your head every second of the day between 9:30 and 4. If the market’s hiding its cards, just sit on your hands.

As you’ve probably guessed, overtrading is one of the most common problems afflicting the gambler. He wants to be in the game at all times. And this lesson is especially important during the range-bound market we’re currently experiencing.

Bottom line: This is the kind of environment where you’ll probably experience plenty of false breakouts, whipsaws, and other setbacks. That’s when gamblers get antsy.

If you’re afflicted with the overtrading bug, now’s your chance to step back and reevaluate the market and your trading strategies. After all, we’re barely scratching the surface of what it takes to be an effective trader.

Perfecting techniques and strategies takes time — yet no amount of planning will help you make consistent profits if you can’t break these bad habits first.

So stop gambling – and start trading.


Greg Guenthner
for The Daily Reckoning

P.S. Stop gambling and start trading. If you want to cash in on the biggest profits this market has to offer, sign up for my Rude Awakening e-letter, for FREE, right here. Stop missing out. Click here now to sign up for FREE.

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

View More By Greg Guenthner