I hadn’t heard about the author when I saw several recommendations to read the book about habits. I got it out of curiosity and due to the fact I’d been focusing more on my psychological skills for trading in the past couple of years. The book was published in 2018, but in the introduction the author already gives a brief overview how he started to publish articles on the topic in 2012, and got a deal with a publisher to write the book in 2015. It’s about personal experience and research that lead James Clear to become a specialist in behavioral science and habits. In 2002, James suffered a serious injury in baseball and was put in coma. His recovery was based on different kinds of habits that helped him overcome the issues. Now he has published this book to help other people to fulfill their lives based on the fundamentals of human behavior.
The power of habits
The first chapter already made me think about my own trading journey. The author describes habits as a double-edged sword, meaning you can have good habits work in your favor and bad ones being destructive. Small habits are unnoticeable in short-term but may add up greatly in the long-run. Getting better 1% each day may seem like a lagging event but will actually make you 37 times better in a year! The same goes for bad habits against a person. Habits, thoughts and stress compound just like money compounds over time. It’s not about setting goals to get ahead in life but about following a system of improvements that will get one over the threshold to achieve goals. Patience is important in the process. To a systematic trader like myself this makes much sense actually. The best way to get habits work is to change beliefs that form one’s identity. For example, instead of setting trading goals of how much money to make, it is much more efficient to think of being a successful trader and do things that a successful trader would do. A good habit should be obvious, attractive, easy and satisfying.
The four laws
James gets into the four laws of habits and gives great examples. I will briefly touch on some main points but without the whole story it’s actually difficult to grasp the ideas. Habits become unconscious behavior that makes us do things automatically without thinking about it. The behavioral process needs awareness. Therefore, it’s good to make a list of habits and score them. There are some good recommendations in the book on how to do it best. The first step to make a behavioral change is to make it obvious. Starting a new habit is best with a set time and location. A good practice is to stack a new habit on top of others. The author makes some good points on why environment and context matter for a habit and how to best use it for oneself. For example, having office or at least a dedicated desk for work and not doing it in the kitchen or on the living-room couch. Once a habit is formed it’s hard to be forgotten but it needs the cue to be triggered.
Habits must be attractive. This leads to release of dopamine in the body, creating motivation for the habit because of feeling pleasure. Pair an action you need to do with an action you want to do, to create temptation. We adapt habits of our culture, different groups and the ones with status. Join groups where desired habits are the norm. Make bad habits unattractive.
Behavioral change can happen better if it is made easy. Practice a habit instead of just planning it. Focus on taking action not being in motion. Repetition is important. When friction is low, habits are easy. Increase the friction for bad habits. There are good ideas in the book how to shape new habits and make technology work best in our favor to automate them. You’ll find out about the 2-minute rule to make things easy.
One is more inclined to repeat an activity when it brings satisfaction. An immediate reward keeps one motivated but it’s actually delayed rewards accumulating in the background that are important. Accountability partner can add motivation to avoid bad habits because there will be a cost to an action. Many mindful insights about the topic and what to do in order to achieve more satisfactory results.
Many examples how genes and talent should be used in one’s favor when creating habits. It’s normal to be different and create habits that fit you. Task difficulty should be optimal between boredom and anxiety to stay motivated. More about the reasons are found in the book. Once habits are mastered and become routine, professionals will stick to the schedule while amateurs will let life get into the way. The downside of habits is that you stop thinking about it and make small errors. Habits combined with deliberate practice create mastery. This point is also relevant to financial trading – making fast judgments with intuitive mind can cause errors while deliberate mind will help to make more rational decisions.
There are good thorough examples of different life situations that really make the reader think about his or her situation. The best way to understand the concept of habits is without a doubt by reading the whole book. This will put odds in your favor to really take action and not just think about it. The book will help you to create good habits and break bad ones. Tiny steps can lead to remarkable results. The content is really powerful and mindful about bringing more success into life whatever the expertise of the reader. You’ll probably find other insights that touch more on your personal situation. I highly recommend to read it from cover to the end.
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