How to break your bad trading habits

Trading options in Singapore can be a lucrative opportunity, but it is essential to have the proper habits and strategies in place to succeed. Bad trading habits can lead to costly mistakes and missed opportunities, so it’s important to recognise those bad habits and break them as soon as possible. Some bad habits traders often develop include over-trading, taking too much risk, and not diversifying. Traders should avoid these habits, or break them as soon as possible, to continue to do well.

Develop a trading plan

Before even starting, it’s essential to develop a plan that outlines the strategies and goals for each trade. It will help traders avoid making impulsive decisions and sticking to their predetermined limits. Additionally, developing a plan helps traders keep track of their performance and determine what types of trades have done well or are not doing well. Having a plan in place also allows traders to adjust their strategies as needed and find the best ways to trade successfully with minimal risk. If you are stuck on this step, you should reach out to reputable and experienced financial advisors like Saxo who can recommend a few strategies for your trading plan.

Take calculated risks

While trading carries some inherent risks, taking manageable and well-informed risks is essential. Even with a plan, it’s important to keep risk levels low and only make trades with informed decisions. Additionally, traders should use stop losses orders to minimise potential losses and set limits on how much they are willing to lose in any single trade. In addition, traders should also be aware of market conditions and adjust their trading strategies accordingly.

Keep a trading journal

Maintaining a journal of all trades can help traders identify bad habits and give them insight into how their previous trades affected the overall outcome. Keeping track of successes and failures can also help traders find new ways to improve their trading strategy. Additionally, recording relevant trading information such as entry price, exit price, earnings or losses, and other details can provide additional insights into how the trader performs over time.

Diversify portfolios

Diversification helps spread risk over different markets or asset classes, allowing traders to benefit from movement in multiple directions without taking on excessive risk at once. It helps traders maximise their chances of doing well and avoids the risk of putting all their eggs in one basket. Additionally, it is essential to diversify into different types of options, such as calls, puts, or indices, to further hedge against risk.

Have realistic expectations

Many traders tend to over-expect their investments, leading to unrealistic goals and bad decisions. Realistic expectations are essential for sustained trading success as it helps traders understand what they can achieve with their current strategy and resources. Additionally, setting achievable goals helps traders stay focused on what needs to be done to achieve those goals without getting too caught up in the potential rewards of successful trades.

Some bad trading habits to avoid

While trading may seem to come to you naturally, there is always a possibility of developing bad trading habits. Traders should know what poor trading habits are, so they can know what to avoid when trading and how to diminish these bad habits if they’ve already been developed.


Over-trading is when a trader enters too many positions and holds them longer than necessary, which can lead to excessive risk-taking, which can be costly if the trades don’t turn out in their favour.

Taking on too much risk

Traders sometimes take on too much risk by trading beyond their means or investing more money than they can afford. It can quickly deplete a trader’s resources and expose them to potentially significant losses.

Not following a plan

Not having a trading plan or straying from a predetermined strategy can also lead to losses. Without a clear action plan, traders may wind up impulsively entering trades in addition to making unwise trading decisions.

Not managing risk

Another bad habit is failing to manage the risk associated with each trade. Not using stop-loss orders or other methods to limit losses can quickly erode funds and even cause significant losses if things don’t turn out as planned.

Focusing on short-term outcomes

Some traders become overly focused on immediate trading results instead of considering the long-term implications of their actions. It often leads to unrealistic expectations and poor decision-making.