The Trader's Pendulum. Samuels Jody

is how Charles has begun his typical morning for the past 15 years. Charles is a trader – a highly successful one. He is enjoying the freedom, monetary rewards, and a rejuvenating sense of satisfaction from his career. He credits his success to the morning routine that prepares him both physically and mentally for a long day at work. He also thinks that keeping to a strict routine has given him discipline and determination, both being important ingredients for success in trading.

      But this is only part of the reason why he is successful.

      A Trader's Work Begins before He Starts to Trade

      Every morning, Charles switches on his “work mode” during breakfast.

      At the dining table, as he is reading the news, he is scanning for interesting events that happened overnight. Particularly, he will look for clues that might impact the currency, commodity, and stock markets, the business world, and the global economy.

      At this point, he is merely gathering information, because Charles still wants to enjoy his breakfast. But he makes mental notes for further investigation for when he starts working later. Charles knows that news can impact global markets, and he wants to make sure he takes into consideration the potential event risks, as well as the emotional and psychological responses of investors in the markets, when he plans out his trading strategy for the day.

      Being an independent trader with no manager or boss to report to, Charles knows that he has to be accountable for his trading. Every morning, he will define a set of practical financial goals that he wants to achieve out of the day's work. How does he know whether these goals are practical? He doesn't have a scientific way to determine this, but he does it based on a number of factors, including the past performance of the trades, the recent market performance, a gauge of his own capability – and, of course, the breakdown of his long-term (monthly and yearly) earning targets.

      But these goals are merely a dream without proper executable steps to achieve them. Charles knows this well. He has the habit of planning out clear trading rules before he starts trading and stalking the markets for his high probability trade setups. For Charles, trading is a survival game that requires him to constantly keep his eyes on the destination, and to be clear of the route and strategy to get there. In addition, he is cautious about following his rules and checking the price action before he enters a trade. All these habits have helped him to survive in the game – and the ultimate goal of the game is to survive as long as possible.

      Charles understands that it is useless to have a fantastic strategy and plan sketched out if he doesn't follow them. As part of the morning routine, right after he logs into the trading platform and before he executes the first transaction, he will do something unorthodox: He will stand up straight, gather his strength, and with his fists clenched, chant this mantra three times to himself:

      “I have planned my trade, and now I will trade my plan.

      When it's time to strike, I will strike.

      I shall not overanalyze, I shall not procrastinate, and I shall not hesitate.”

      He adopted this habit when he started his trading career at a relatively young and energetic age, and still keeps doing it. Somehow his little ritual gives him a jolt of motivation to start trading.

      Silly? Maybe. But it works for Charles, and he regards this to be one of the habits that are responsible for his success. The habit to “plan his trade and trade his plan” has helped to keep his emotions at bay when he trades, and allows him to make logical trading decisions. What's important to him as a professional trader is to win the game, whatever it takes, even if it's a silly ritual like repeating a mantra.

      The End of Trading Isn't the End of His Day

      It's 4 o'clock in the afternoon, the stock markets are closing, and Charles is getting ready to wrap up his trading activity.

      But a professional trader's day never ends right at the point when he ends his trading session. Charles will take a 15-minute break, do some simple stretches, grab a cup of freshly brewed coffee, and begin another important task while his memory of today's trading is still fresh.

      Because Charles is a committed trader, he seeks daily improvement in his trading – no matter how big or small it might be. He uses a trading journal to aid him with that. He will record his trades, the results, and his observations, and review them one by one against the plan, strategy, and goals that he defined earlier in the day.

      As an effort to reflect on his daily performance, he will fill up a trading blotter. In the process, he asks himself some of the following questions:

      Was I in a good frame of mind today? Was I “in the zone”? Did my personal life affect my trading?

      Did feelings of perfectionism and overconfidence creep in?

      Did I plan my trades well? Or was the plan based on speculation or unproven tips from other traders?

      Did I trade my plan? Did I trade impulsively? Did ego take over my logical analysis?

      Overall, was I satisfied with the results of today's work?

      By answering these questions, he learns his lessons from what he has not done right, and commits to not repeat the same mistakes again. But it's not only the mistakes that he wants to discover. He also wants to be reminded of the right decisions that he has made, so that he can apply the same actions when similar situations arise.

      When nothing spectacular happens during the day, the review can be done within 30 minutes; but when major events take place, Charles might work past dinnertime to get his review done. To him, every experience is an important lesson. He wants to make sure he does not do a sloppy job in his review, and miss any of the lessons. Only after Charles is satisfied that he has learned all he should from today's trading will he call it a day.

      This habit of self-coaching and accountability has played a major role in helping Charles to reach his level of success today – along with many other hallmark traders' habits.

      What Can We Learn from This Successful Trader?

      As you read about the morning routine of Charles, I am sure one keyword that repeatedly appears in the passage has caught your attention: Habit.

      The Merriam-Webster Dictionary defines habit as “a usual way of behaving; something that a person does often in a regular and repeated way.” Force of habit makes us brush our teeth in the morning; it is what makes us crave food at around the same time every day; it is what sends us to bed before the clock strikes midnight.

      If these seem too trivial, what about the habit we developed to exercise three times a week so we keep in shape? What about the one that makes a worker arrive at the office on time to avoid reprimand from his supervisor, and finish his work at 5 p.m. so that he can enjoy some life after work? What about the habit that prompts a business owner to review the accounts and take note of irregularities every evening?

      On a negative note, habits are not always good. Overeating is one of the main causes of obesity; people who are mindless when walking (e.g., busy checking for Facebook or Twitter updates) could become victims of road accidents; those who habitually give up at the first encounter of failure are less likely to succeed in life.

      We are creatures of habit, and our habits shape who we are. I have shown you how Charles allows his good habits to guide him in his trading. But what you have seen is only what he does in one day – what you haven't seen are the habits that he has formed over 15 years, which dictate how he deals with this trading business as a whole and which keep him in good mental and physical shape for peak performance.

      Charles is not the only one who conscientiously forms and maintains habits. All of the highly successful traders do. In my years of association with the high flyers in this industry, I have seen over and over again that they are relentless in cultivating positive habits that will bring them success, and doing away with the negative ones that are in their way.

      Here are the important questions for you to ask as a trader: What are the habits that successful traders have in common? What can I learn from these habits? And how do I model them for my own success?

      You