Ditch the Goals. Get Better Habits

Read Time: 4 Min 

 Have you ever noticed that most successful people have good habits?

Best-selling Author James Clear explains why well in his book Atomic Habits when he says, "You don’t rise to the level of your goals, you fall to the level of your systems.”

By developing better systems and implementing them over and over, they become habits and that becomes your engine for growth in life and as a trader.

Unfortunately, most people don't know how to establish good habits and get rid of bad ones.

In this blog issue, I am going to break down how I use Jame's simple four-step process for establishing good habits and tips on how to get rid of old ones that don't serve you anymore.

Most are too concerned with results rather than who they want to become.

Most people struggle to change their habits for two reasons:

• First, we try to change the wrong thing

   

• Second, we try to change our habits in the wrong way

   

The first mistake is that we try to change the wrong thing. To understand this consider that there are three layers to how we produce change.

• The frist layer is changing your outcomes - concerned with changing results

   

• The second layer is changing your process - concerned with changing processes and systems

• The third is changing your identity - changing your beliefs.

Outcomes are about what you get, processes are about what you do, and identity is about what you believe.

When it comes to getting results, the problem is not that one level is better than the other. All levels of change can be useful.

The problem is the direction of change. Most people focus on what they want to achieve which leads to outcome-based habits.

The alternative is to focus on identity-based habits. With this, we are focused on who we want to become.

The goal is not to read a book it is to become a reader. The goal is not to trade but to become a trader.

When your behaviors and your identity are aligned, you no longer have to actively pursue behavior change, you are just being yourself.

The real reason habits matter is because they help you become the person you wish to be.

The most effective way to change your habits is not to focus on what you want to achieve but on who you want to become.

Becoming the best version of yourself requires that you continuously edit your belief and upgrade your identity.

Want to change your habits to become the best you?

In order to get better at creating good habits, it is good to understand how habits are formed.

Here's how habits are formed 4 simple steps: Cue, Craving, Response, and Reward.

Step 1: Cue

The cue triggers your brain to initiate a behavior. This is a bit of information that predicts a reward.

For a gambler, the sounds of slot machines might trigger a desire to gamble.

For a floor trader, the sounds of the opening bell might signal a desire to trade.

The cue sends the signal to your brain which activates the next step, craving.

Step 2: Craving

Cravings are the motivational force behind every habit. However, what you crave is not the habit but the change in state that it produces.

For example, you don't crave smoking a cigarette, you crave the relief that it provides.

You don't want to turn on the TV, you want to be entertained.

Cravings are linked to the desired state.

When these cravings are strong enough, they motivate a response.

Step 3: Response

The response is the habit you perform which can take the form of a thought or an action.

Whether the response occurs depends on how motivated you are and how much resistance there is to the behavior.

A habit can only occur if you are capable of doing it.

For instance, you can only dunk a basketball if you are capable.

Finally, the response delivers a reward.

Step 4: Reward

We chase rewards for two reasons:

First, they satisfy us and second they teach us.

The first purpose is to satisfy a craving or said another way to deliver relief from cravings.

Second, rewards teach us which actions should be repeated in the future and which should not.

Feelings of pleasure and dissatisfaction are part of the feedback look to help you determine which actions are worth repeating.

Rewards close the feedback loop and complete the cycle.

If a particular behavior is cut off in any of these four stages, it will not become a habit or it will cease to be a habit.

Building habits present allows you to do more of what you want in the future.

Building habits are important because they help you become who you want to be in the future.

So how can you establish more good habits and get rid of bad habits?

Fortunately, there are ways that help reinforce the good ones and diminish the bad ones.

How to create a good habit: The 4 laws of habit creation and their inverse for getting rid of a habit.

Law #1: Make it obvious/hide it

Action steps:

• Become aware of your habits. Write down your current habits and label them with a +, -, or = for neutral.

• Create behavior intentions for the habits you want. "I will (behavior) at (time) in (location).

• Use habit stacking: "After (current good habit), I will (new habit).

• Design your environment. Make cues for good habits obvious and visible.

To rid yourself of a habit make the cue invisible. This will disrupt the habit-creating sequence.

Law #2: Make it attractive/unattractive

Action Steps:

• Temptation Building. By pairing an action you want to do with an action you need to do, you can build temptation for the action you want.

• Join a culture where your desired outcome is normal behavior, like a meetup group or a focus group.

• Create a motivational ritual. Do something that you enjoy right before a difficult habit.

To rid yourself of a bad habit do the opposite of these things.

Law #3: Make it easy/hard

Action Steps:

• Reduce friction. Decrease the number of steps between you and the habit you want.

• Prime your environment. Prepare your environment to make future actions easier.

• Master the decisive moment. Optimize the small choices that deliver a big impact.

• Use the Two-Minute Rule. Downscale your habits until they can be done in two minutes or less.

• Automate your habits. Invest in technology and one-time purchases that lock in your future habit or behavior.

Doing the inverse of these actions associated with a behavior that you don't want will discourage the negative behavior.

Law #4: Make it satisfying/unsatisfying

Action Steps:

• Use reinforcement. Give yourself an immediate reward when you complete your habit.

• Make "doing nothing" enjoyable. When avoiding a bad habit, design a way to see the benefits.

• Use a habit tracker. Keep track of your habit streak and "don't break the chain."

• Never miss twice. When you forget to do a habit, make sure you get back on track immediately.

Create an unsatisfying event if you don't perform the habit you want, like an accountability contract. Agree to pay someone $100 if you don't follow through.

Whenever you're ready, there are 3 other ways I can help you:  

1. If you are just getting started in trading, then you need a framework for operating in the current market. I recommend one of my affordable courses: 

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