To become a successful trader, bad habits need to be removed and new habits need to be established. Before we dive into creating these new habits and removing bad habits, there needs to be an understanding of human behavior. In Atomic Habits, James Clear provides a four step model for human behavior that will help you become aware of your current habits and a process of using four laws to create a new habit.

Four Step Model For Human Behavior

1. Cue
2. Craving
3. Response
4. Reward

In the four step model for human behavior, the first step is a cue which could be an awareness that comes before desire such as time of the day or an object you see that gives you a cue. From that cue, you start to require the second step which is a craving that's created when you assign meaning to the cue. The third step is our response which is the energy we sacrifice in order to get our craving. Once we have sacrificed or expended that energy we receive the reward which is the fourth step by receiving our craving.

Four Laws To Creating A Good Habit

Law #1 - Make It Obvious

1. Become aware of your current habits by writing them down.
2. Get specific “I will [Behavior] at [time] in [location]
3. Use habit stacking “After I [current habit], I will [new habit].
4. Design your environment, make it work for you, not against you.

Law #2 - Make It Attractive

1. Use temptation bundling. Pair an action you want to do with one you need to do.
2. Surround yourself with people and an environment where your desired behavior is the normal behavior.
3. Do something you enjoy immediately before a difficult habit.

Law #3 - Make It Easy

1. Reduce friction by decreasing the number of steps.
2. Prime your environment.
3. Be decisive and optimize small choices.
4. Downscale your habits until they can be done in two minutes.
5. Automate your habits where possible.

Law #4 - Make It Satisfying

1. Give yourself an immediate reward when you complete your habit.
2. Make “doing nothing” enjoyable.
3. Use a habit tracker (X’s on a calendar)
4. Never miss doing your habit twice.

So how can we put all this into action? First we need to become aware of our current habits and what new habits we need to establish. We can write these habits down, but avoid making a to-do list. Instead, make it simple and specific by writing down exactly what you are going to do to create this new habit. Start with committing to something easy so you don’t get discouraged and make it achievable to reach your goals and become a more successful trader.

Knowing what your current habits are and what habits you need to establish is a great start to a change, but how do you break a bad habit? In the next article, Atomic Habits Pt. 3, we will dive into “Four Laws To Break A Bat Habit.”

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