Last updated on June 17th, 2020
The principles that are used with A.A. can be applied to help traders who are struggling.
These principles can help traders avoid falling back into the habits that have prevented them from reaching their goals:
- Failure to prepare for their trading day (or career)
- Not sticking to their trading plan
- Refusing to exit a losing position
- Taking small profits – not waiting for the trading plan exit
Most of us, if we are honest with ourselves, are guilty acting in ways that are detrimental to our trading account and emotional strength.
The 12 step process used in A.A. is based around:
- Structured support
- Alternative beliefs and routines.
All of these combined enables its members to change their habits and become a better version of themselves.
1. Admit, Identify, Accept the Problem
Being ready for change is the first step you must take in altering any form of habitual routine. Unless you know that you have to do things differently but that you currently either do not know how or are unable to operate in this new way consistently, you’ll never be able to put in the effort required to making any changes permanent.
Once you’re over this hurdle, the next stage is to really delve into why the issues you’re having exist in the first place.
Taking a mental inventory and reliving difficult trades can be emotionally exhausting, but without doing so it’s difficult to pinpoint what it is you need to change.
In regards to acceptance of the issues, in a similar way to A.A. members not truly accepting their own problems, traders often only think they have a problem when they lose control and their account takes a big hit. They then look at themselves and for a time perhaps, they overcome their issues.
But afterwards they often fall back into the same habits which led to the relapse in the first place.
It’s often painful to accept that the problem is a big one and so they prefer not to have to mentally deal with it over and over again.
I hear stories from traders all the time about how many trading accounts they blew up before they finally managed to become consistent and develop a level of trust in themselves that they would always act in a responsible manner. By blowing up several accounts and losing a pot of cash, it became more painful for these traders to remain the same than to make the change.
The balance had tipped for them and trading success could be seen.
2. Be Accountable – Commit to Change
Having come to the conclusion that change is totally necessary, it should be easy to decide on the changes and then just make them happen, right?
Many of the psychological problems a trader faces are habitual and deep-seated.
So when the markets are moving fast or maybe you’re having a losing streak – the very time when you need to rely on doing the right things, the emotionally charged situation leads you to act automatically in a way which you might not consciously choose to.
By making the commitment to change and having accountability for your own actions, you not only bring the actions you are trying to prevent to your conscious attention, but you are also constantly giving yourself the time to assess how you are progressing.
However, taking responsibility for your own actions and truly accepting risk is easier said than done. Many people understand risk but do not embrace it. Placing a stop order is not the same as being fine with a losing trade.
The key to accountability lies in understanding.
To understand, it’s imperative to have a well thought out and unambiguous trading plan. That way, it’s impossible to deflect blame onto anything other than yourself when the plan isn’t followed correctly.
To maintain accountability over the long run, a commitment must be made to do what it takes. Part of this commitment should be:
- Studying your plan
- Thoroughly testing it
- Learning where it works well and where it breaks down
- Journal your trading (as I also often point out).
If you really want to make the change, you’ve gotta do the work.
3. Believe In Your New Approach – and Yourself
In order to maintain new habits, market understanding and trading approaches it’s imperative that you believe in them.
If you have already understood that your approach in the past has been counter-productive and you’ve made the commitment to change, it’ll all be in vain if you cannot get behind the new ideas which you are trying to use.
You might make some progress, but when things get tough, it’s all too easy to slip back into the same ways as before unless you have an ingrained belief in the ideas you have embraced.
By exploring and understanding the old habits and the new ideas, constructive beliefs can be cemented into your psyche so that you may be able to remain true to them even in the face of the most severe adversity. Having done the work as already mentioned, belief can be strengthened, but sometimes it will still be hard to press onward.
4. Your Trading Community Can Be A Lifeline
Meshing together all of these ideas is the structured support which a community can offer. Think of Ed Sykota and the Trading Tribe
By having members of all levels – beginner, intermediate and advanced – whichever stage you are at you’ll benefit from their support.
A trading beginner will benefit from the vast experience within the group. Being able to have someone to talk through their issues with and really make a plan of action can be invaluable.
Once you understand what it is you need to be doing, the intermediate can take an accountability which whether trading from home or even an arcade, many traders do not get. The strength and will imparted by knowing that someone else has vested emotional interest can be extremely powerful.
Both beginners and intermediates also can take heart from the progress of others and this can give them something to aim for. Being able to see others who have been through a similar process can make your goals seem more attainable to you and can be inspirational.
But it’s also the advanced of a group who benefit.
By helping and teaching others, an experienced trader becomes somewhat of a role-model; they must be on their game and prove that they are worthy of their position in the community.
Much of life is about the communities we are part of and trading is no different. Drawing on the collective wisdom, motivation, competition, accountability and innovation of the community you’re part of can really aid your progress as a trader. Just like the members of AA, if you submit to your group, “Traders Anonymous” (or really any trading community you’re part of) can help you change for the better.