The Stages of change and how it applies to trading

    "Is there something wrong with me?" "I know how to trade, why cant I make money consistently?" "EVERYONE makes it look so easy on social media." I believe every trader has told themselves something like this at one point or another in their career. I know I sure did. You spend hours and hours studying charts, seeking knowledge from successful traders, practicing, back testing. You know the technical set-ups, read all the fundamental knowledge there is to consume; but somehow still you manage to botch trades and lose money. There multiple stages that have to be reached and conquered in order to be successful in making any significant change. Precontemplation, Contemplation Preparation, Action, Maintenance, (Relapse) and Termination. This was huge step in my trading career to step back, realize and accept where I stood within this model on my trading journey; and very honestly the biggest key (for me) to be consistently profitable

Precontemplation 

In this stage traders are usually unaware and fail to recognize the need of the emotional and mental component of trading. Most are looking to chase alerts or a magical indicator that is going to be the holy grail to making them a lot of money.  Oblivious is the word that comes to mind when describing a trader in this stage.

Tasks at Precontemplation stage:

• Increase awareness of why change is needed
• Consider the risks regarding current trading behavior
• Consider possibility of change

Contemplation

At this point traders feel their back is against the wall. Most times have blown up a few accounts or only have enough to make a few more meaningful trades. They know that a change is needed outside of just the technical and fundamental aspects of trading. Most realize if they could stop making impulsive or emotional decisions they would be grossly more successful. They want to enact a change to be more successful but most procrastinate.

Tasks at this Contemplation stage:

• Consider the pros and cons of existing trading behaviors.
• Weigh the pros and cons of new trading behaviors
• Identify obstacles to change.

Preparation

In the Preparation stage traders commit or resolve to changing negative emotional and impulsive trading decisions. Most times traders set an actionable trading plan or rules for themselves to refer to and trade with. The feeling of what else do I have to lose by trying it this way is also prevalent.

Tasks at Preparation stage:

• Increase commitment to change
• Write down trader goals
• Develop a plan and rule book

Action

In the Action stage traders are enacting the trading plan and rules set in the Preparation stage. The goal in this stage is to be consistent in forming new positive behaviors. Traders start realizing more success and consistency. Most times less stress is felt while taking and sticking to trading plan and rules. 

Tasks at Action Stage for traders:

• Implement trading plan and rules
• Revisit and revise the plan if needed. 
• Overcome difficulties and maintain the commitment
• Reward successes

Maintenance

"I've changed." This is the prominent feeling of a trader in the Maintenance stage. Traders have a new pattern of behavior sustained of a reasonable amount of time and is now second nature for the trader to implement in day to day trading. Traders become confident they can continue their new trading plan, and the behavioral change is embedded in their trading. 

Tasks at Maintenance stage for traders:

• Maintain positive trading behaviors across multiple situations
• Continue plan and rules into trading
• Avoid regression relapse into old ways

Relapse

Although relapse is not necessarily a stage on its own, it is a failure to maintain the existing position in positive trader behaviors. Traders will start FOMO-ing into trades again, will not stay disciplined to their stops or profit targets. Unfortunately, relapse is typical for many trader behavior related changed but it is not inevitable. 

Tasks during Relapse:

• Identify the triggers linked to relapse
• Reaffirm the commitment to change
• Revisit tasks associated with the stage the trader has returned to

Final Stage: Termination

At this point the Trader has no inclination to revert to their previous negative trading behaviors. The plan and rules set are considered a success.

Tasks at Termination stage:

• None, Trader's old behaviors are in the past.

    As said previously, a major trading key is to be able to step back and look objectively where the trader is in this path. Once aware it will be significantly easier to make a plan, put action to the plan and maintain the positive behaviors to realize consistent success going forward. Implementing the emotional and mental discipline aspect to trading along with the technical knowledge, fundamental knowledge and back-tested strategy with a winning edge is truly the key to being successful.