How I Turned a Successful Trading Strategy Into a Successful Life Strategy
5 simple habits to avoid self-sabotage, learn from past mistakes, and master your own psychology
When I’m not working as a doctor or writer, I work as a trader.
I got into trading for obvious reasons — who doesn’t love the idea of using money to make more money.
But it became so much more than just an occupation. It changed the way I lived my life, through the habits it instilled in my psychology.
It might be hard to see how drawing lines on a chart and clicking the “buy” and “sell” button every so often could have any application to life in general. But beneath the technical skills of trading, lies an intimate awareness of one’s own psychology.
We have to be aware of each step of our thought process so we don’t get misled by our biases and blind spots. If we don’t have complete oversight of how we’ve arrived at a decision, we’ll struggle to pinpoint why we make bad ones.
Emotions often cloud our thought processes. But if we can recognize them the moment they arise, we can avoid the self-destructive behaviors they lead to.
If we don’t recognize we’ve become fearful, we’ll close a trade before it reaches its target. If we don’t acknowledge our greediness, we’ll keep a trade running even when it’s hit its target.
By understanding our psychology in this way, we can avoid sabotaging our progress and repeating the same mistakes.
I use the same approach in my personal life.
It allows me to pinpoint why I make bad decisions, and avoid repeating the same mistakes. It gives me awareness of my biases, and how emotions cloud my judgment. And it helps me avoid self-sabotage and improves my chances of success.
I’ll show you how to apply the 5 habits of my profitable trading strategy, to create your ideal life strategy. Not only will you become a master of your psychology, but if you ever decide to trade the markets, you’ll already have an edge.
1. Keep a journal
Every time I take a trade, I record my rationale for doing so. I have to be able to justify exactly why I think it will be successful, and why I’ve chosen certain price points.
During the trade, I document my thought process in any decisions I make, and acknowledge any emotions that arise.
But the real gold lies in the post-trade reflection.
A week later, when the dust has settled, I come back and review my journal entry. I’ll immediately become aware of things I was oblivious to. I’ll see the real reason why I cut the trade early. I’ll spot price patterns that I’d been blind to. And I’ll identify key areas that I need to work on to improve performance in the next trade.
Armed with new insights, I create an action plan. This plan not only helps me avoid making the same mistakes, but it helps me repeat the things I did well.
I apply a similar strategy to my life.
Many get put off the idea of journaling because they’re told to do it every day. I don’t know about you, but I barely have enough time to do my laundry, let alone write about my thoughts and emotions every day.
So I journal in a focused way, under these circumstances:
When I have a disproportionate emotional reaction to something. Perhaps someone said something that triggered me, or I felt rejected by a friend and it cut unusually deep. By deconstructing what happened, I can understand why I reacted this way, and create an action plan to “risk manage” similar reactions in the future.
If I have an important decision to make. Big life decisions are hard enough without subconscious emotions and behaviors trying to mislead us. By writing about what’s going through my mind, I can avoid making bad decisions. I can also justify why I thought something was a good decision. Reading over these journal entries I can then learn from past errors in judgment.
If I find myself stuck in a negative emotional state. When we’re feeling down in the dumps, we tend to be harsh on ourselves. This only leads us to get stuck there. But by reflecting on how we got there, and the emotions we’re currently feeling, we can understand what’s actually going on, and not just what our emotions tell us is going on.
The most important thing is to look at what we did well and what we could improve on. This is the evidence we need to create our action plan, where we do more of what worked and less of what didn’t.
2. Reflective thinking
Journaling is the formal approach to reflecting on our experiences. It takes time and energy to do it properly, which is why I don’t do it every day.
But I do practice reflective thinking every day, and you should too.
Here are different ways you can do this:
Voice recordings. I often record myself talking through issues and experiences. While this is somewhat eccentric, it works wonders for me. Talking through it not only helps me understand my thought process better, but I can also listen back over it and gain further insights. Of course, if you can’t bear the sound of your own voice, you can try one of the other methods below.
Talk it through with a loved one. If you’re blessed to have a good listener in your life, talking it through with them can be a great way of reflecting. Not only do you become more aware of your own thought process, but you also get a second opinion on the matter.
Listen to music and let your thoughts run wild. I like to do this whenever I’m traveling — watching the scenery pass by while listening to music always puts me in a deeply reflective state. But you can do it whenever you find you’re most reflective.
Choose the method you feel most comfortable with. Which one do you think you can get into the habit of doing every day?
3. Practice mindfulness meditation
Journaling and reflecting is a way of recognizing and addressing problems after they’ve arisen. But if we really want to stop falling victim to our subconscious drives, we need to become mindful of them the moment they arise.
Mindfulness has been essential in my success as a trader.
But it doesn’t come naturally. Emotions are often so captivating we can’t help but get swept up in them. This automatic way of reacting to emotions once had a survival advantage. But in the modern-day, emotional knee-jerk reactions often cause us problems. So we must change our relationship with our emotions. We can do this with mindfulness.
The benefits of mindfulness are best understood by considering the opposite state of “mindlessness”. Here, we lack awareness of our thoughts, emotions, and behaviors until after the fact. We play out automatic, deeply conditioned patterns of behavior, then look back and wonder why on earth we behaved so carelessly.
But when we become mindful, we gain real-time awareness of our thoughts, emotions, and behaviors as they unfold. This allows us to choose different ways of thinking, reacting, and behaving. And this has huge implications on how our lives will unfold.
Are you sold? Excellent.
Like any other skill we want to acquire, we need to practice. The longer we practice, the more skillful we become. With each hour we spend practicing mindfulness, the more mindful we become.
Practice mindfulness meditation every day. Start with guided meditations. Apps like “Waking Up” or “10% happier” are both fantastic. For a free option, “Smiling Mind” is also good.
With enough practice, you’ll begin to experience all the benefits of having real-time awareness of your mind’s activities. All those subconscious thoughts, emotions, and behaviors will suddenly come to light.
4. Have a weekly or monthly review process
At the end of each month, I go through all the trades I took and read all my journal entries.
This gives me an overview of my performance and helps identify issues not picked up during the journaling phase.
First, I write a formal summary of the month’s activities. This includes a list of my best trades, my worst trades, areas I need to work on, areas I’m showing progress in, and how well I implemented last month’s action plan. All these insights are then used to create a new action plan.
In my personal life, I do this on a weekly basis.
Every Sunday, I evaluate each area of my life in the same way. I look at what’s going well, not so well, and the progress I’m making. I break it down into the following categories: Personal life, health, mindfulness, writing, and psychiatry. I write a small summary for each section, then address any issues with an action plan for the week ahead.
Then, at the end of each year, I read through all my entries. This gives me an overview of how my year went and the overall progress I’ve made toward my life goals. Seeing this macro view of my life puts everything into perspective, reminds me of what’s important, and keeps me on track.
Doing all this journaling, reflecting, meditating, and reviewing may seem tiresome, but it’s the best way to get all the data you need for the final step…
5. Develop a “life system”
When traders have gathered enough evidence on what works and what doesn’t, they combine it all into a comprehensive trading system.
Not only does our system enforce ongoing reflection on our trading, but it also dictates the rules of engagement. Rules that are the product of every past mistake, every bad decision, and every careless blunder. Rules that maximize profit potential and prevent any opportunity for self-sabotage.
My trading system tells me when I can take trades, and when I’m permitted to close the trade early. It even has things like “no trading activity is permitted after consuming more than one standard drink of alcohol” and “if any of the rules are broken you must cease all trading activity for one week”.
I follow these rules religiously, because any time I’ve broken them in the past, it’s always ended badly. Every rule is evidence-based and taken from past experiences. And in answer to your question, yes I have traded drunk before and yes it didn’t go well. Hence the rule.
The biggest revelation that made me profitable in my trading, was realizing that all I needed was an evidence base. Because everyone’s psychology and trading styles are different, you can’t rely on other people’s evidence. You have to collect your own.
That’s why I spend so much time journaling, reflecting, meditating, and reviewing. It’s the only way to glean the insights I need to ensure my success.
While we can use scientific evidence, or advice from others in similar circumstances, only we can find out the optimal way to live our lives.
So with all this in mind, start gathering evidence on what works and what doesn’t. Start looking at the progress, or lack thereof, that you’re making in different life domains.
Try and be objective in how you do this. It’s not about assessing your value as a person. It’s about looking at the evidence, then using that evidence to improve on the design of your life. The goal is to live the life you want to live, whatever that means to you.
Everyone’s life system will be different. Mine is rather comprehensive and errs on the side of excessive introspection. Yours might have a directive to “avoid rigid rules and obsessive performance reviews”. But all life systems should be evidence-based, and align with your values.
I wish you good luck on your journey. And if ever you’re struggling with anything, just ask yourself: “Have I encountered a similar situation in the past and do I have any evidence to guide me?”. If not, start collecting some.