We’re at the end of our first week of January, so if you’re like most people, that means one thing: you’ve already broken at least one of your New Year’s resolutions.

As Mark Twain put it: “New Year’s Day: now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual.”

Having spouted off a lengthy list of my own resolutions across the pages of Market Maven, I’m now forced to deal with the tricky bit – keeping them.

Given the depleted state of the biscuit tin in our house, I suspect that my wife and I aren’t doing so well on our personal resolutions – so perhaps I can do better on my trading ones.

It’s estimated that a third of people who make resolutions will not even try to turn those goals into a reality. And that only one in ten resolutions actually go on to succeed.

With the aim of being one of the few that achieve their goal, I’ve been hunting for inspiration …

Luckily, I’ve not been alone in my quest and the resultant trading tips should be kept in mind.

Trading tips from leftfield – the benefits of a financial penalty

Dean Karlan, professor of economics and Yale University has been examining how some of the world’s poorest people achieve their financial goals. He found that, like all of us, they had problems resisting the temptation to spend the money they had, even when they recognized that it would be better to save for a goal that could have a greater impact on their lives.

When given access to banking, they could save a little, but would withdraw money before they reached their goal. But when offered a savings account that penalized them for making early withdrawals (even though the interest rate was no higher), this significantly improved their chances of achieving their financial goals.

Karlan then applied this “financial penalty” to other areas where people struggled with resolutions. He found that people were significantly more likely to succeed if failure meant that they’d lose money. In fact, his tests showed 30% of those who risked a penalty for failure managed to achieve their resolution – compared to just 5% in the control group.

Breaking the bad habits

It’s not obvious how this applies to trading – surely bad trading habits always come with a financial penalty?

Well, that isn’t always the case – in the short-term, anyway.

The problem is that our bad trading habits are usually linked to short-termism, for example …

– Have you ever found yourself unwilling to close out a losing position because that would involve accepting the loss? I know I’ve done it. Instead, I’ve let the trade run and run … taking on more risk than I should, in the hope that it comes back into profit for me. Sometimes it does. But on the occasions when it doesn’t – I’m left with a substantial loss.

– Or – worse still – I’ve added to a losing position in the belief that I’m snapping up a bargain! (I know, I know – “only losers average losers”.)

When it works – which it will do some of the time – I can pat myself on the back for my great instincts – how I managed to turn a big loss into a small profit.

However, when if fails, I get the shock realization of just what a big risk I’d been running (for such little potential up-side) – and how many winning trades it will take me to get back on track.

Bad habits can benefit us in the short term, but over the long-haul, they’ll always leave us out of pocket.

Playing the long-game

Looking through the long list of trading flaws I’ve drawn up over the past couple of weeks, a common thread is: short-term gratification. Just like dipping your hand in the biscuit barrel brings significantly more pleasure than tucking into a plate of steamed vegetables – so, trying to scalp a few points here and there when I should be sitting on my hands, may be fun at the time …

According to medical experts, our brains our to blame. The immediate gratification that we get from choosing a chocolate Hobnob over a piece of broccoli releases the pleasure chemical, dopamine. We get the same pleasure chemical when we pull off a risky trade, when we should have been checking our risk levels and deciding to sit out.

So, what can I do about it?

Tools to help our will-power

Well, Professor Karlan has come up with an idea. The idea is that you tell him your goal, and you pay out if you fail to achieve that goal.

This isn’t a money-making scheme for Karlan – you choose where the money goes, although I wouldn’t recommend selecting a worthy cause that you’d be happy for the cash to go to. Perhaps choose a particularly smug friend, or a “deserving” charity like some tele-evangelist who needs a new Rolls Royce …

If that doesn’t work for you, then try to remember that changing bad habits doesn’t happen overnight. Trading is a very emotive activity, and fraught with mistakes and set-backs along the way. Find yourself some good trading habits and routines – and eventually they will become second nature.

In the next seven days …

Despite the bleak news we’ve been hearing from the likes of HMV on the high street, we can expect some positive numbers regarding consumer spending and manufacturing output next week.

On Tuesday the British Retail Consortium is expected to report a fair level of high-street spending in December. This may seem at odds with what retailers have been reporting, but it seems that the public have been parting with their cash – they’ve just been getting more for their money as shops cut prices. Plus, many felt that Christmas 2010 would be the last big splurge before the VAT rise and austerity measures hit home – and this simply didn’t happen. Whether this spending continues into the New Year seems unlikely.

We’ve also got UK manufacturing numbers on Thursday, which are expected to show production up again in November – which is better than our neighbours over the Channel or over the Atlantic have faired.

On Friday we’ll see the retail sales for the US, which should be up, showing that unemployment doesn’t seem to affecting the US consumer – and, of course, there are high hopes for the non-farm payroll figures out this afternoon.