Specialty Skills

Habits: The Stuff of Successful Trading

Dr. Woody Johnson

Most traders have an idea that habits are extremely important, as in you “gotta” have them.  But not everyone understands why good habits make a huge difference in whom becomes a consistently successful trader and who is relegated to the list of strugglers and stragglers.  Firstly, habits are essentially repeated patterns of thinking, feeling and doing, internal programs where what you do becomes automatic and drops into unconscious control. Let’s take a look at where they come from and how they are constructed.;

For the most part the strongest habits begin with an intentional purpose or “why” you want something, as in a goal for successful trading.  This purpose sets the tenor and tone of your pursuit and it provides clarity to your mission and passion to your aim.  Now, an operative trading purpose has little to do with money.  Of course, we know that money is an ultimate objective of the trading process. However, money paradoxically speaking has little to do with the outcome of any individual trade.  That’s because money is a transient by-product of the trade, meaning that it could just as easily be the result of dumb luck as it could be due to ardent execution.  It is for that reason that early on in your trading process you don’t want to rely on P&L as the scorecard of how well you are implementing your trade plans.  You’ll want to set your standards on the how well you trade those plans, follow those rules and keep those commitments.  Your purpose takes the “what matters most in your life” like family or a community cause and connects it to the “what matters most in your trades.”  When you do this you are linking the power of passion to your process.

Building skills for successful trading

After you have discovered your purpose for trading you’ll want to incorporate the skill building formula “P + ER + FL + H = SB (skill building)” firmly into your procedure.  This formula is the underpinning of any endeavor where you want to gain mastery.


The “P” stands for protocol.  A protocol is a series of sequentially ordered steps towards an aim or a goal.  Protocols form the foundation for medicine, law, accounting, sports or any situation where you need to optimize resources and do your best.  Protocols are trading strategies, set-ups and rules.

Effective Routines

To the protocols you’ll add “ER” or effective routines.  Effective routines are those behaviors that support the protocols.  As the variable indicates, these are not just any list of things to do, but they are identified behaviors that are written down, prioritized and followed as a check list.  This is a lynch-pin of making a habit because they remove the necessity of thinking about what you are going to do next.  It also feels good to scratch something off your list.  They create behavior consistency and reduce the propensity of becoming erratic.  An example of this would be checking the Globex and the broad markets in the morning; checking the weekly, daily, 240 and 60 minute time frames for levels; and checking news and economic reports to name a few.

Feedback Loop

The “FL” stands for feedback loop.  Any outcome or consequence of your behavior can be understood as feedback.  In other words, when your system of execution (analysis, market data, follow-through, etc.) takes place then information is produced.  This information is extremely valuable because it becomes the scorecard against which you measure, verify and document whether or not your protocols and effective routines are providing the hit-rate that was anticipated.  In other words, you’ll begin to identify what is not working so that you can begin to address it and work towards successful trading habits.  If you don’t know the specifics and the genesis of what caused the trading issue then you can’t change it.  That is why those data are so critical.

Now, here’s another important point, in order for you to track the feedback you must be paying attention.  This may seem like a no-brainer, but you may be surprised at how many traders are “sleeping” through their trades; they are completely clueless and unaware of the intricacies of their process so they continue to do the same ineffective things and make the same mistakes all the while expecting a different result!


Finally, the “H” denotes habituation.  Habituation is a psychological term that essentially means your system has adjusted to a frequently presented outside stimulus. For example, if you live in an area that has a lot of loud noise your system would habituate, you would become accustomed to it.  It is where you become familiar with a situation, place or provocation.  Additionally, when you go through this process of protocols, effective routines and using feedback constantly, you’ll condition your mind and body while creating a strong ingrained pattern of responses becoming an internal program.

Free Trading WorkshopIf you are diligent about going through this series of steps, within 60 to 90 days you will have developed a robust habit that will serve you at your core.  In other words, you will have caused productive goal oriented, resource optimized trading methodology to have dropped into unconscious control and you will have become unconsciously competent.  Furthermore, you will have expanded your skill sets and developed capacity for emotional strength and endurance in the trade and be well on your way to successful trading.

Strong productive habits will form the foundation for successful trading,Tweet: Strong productive habits will form the foundation for successful trading. http://ctt.ec/5Oe31+ just as strong bad habits will be your undoing and cause the depletion of your portfolio. Habits are the engine of goal achievement.  If you learn what to do and learn how to do it well while creating a standard of excellence in your execution you’ll develop the habit of success.  You’ll become accustomed to having and sustaining your A-Game at the platform; trading in the highest and best interests of your highest and best self.  This is what we teach in Mastering the Mental Game on-location and online courses.  Ask your Online Trading Academy representative for more information.   Also, get my book, From Pain to Profit: Secrets of the Peak Performance Trader.

Happy Trading

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.