Maladaptive Daydreaming: where wild minds come to rest
 While daydreaming stop yourself and immediately begin to examine what it was you were just daydreaming about (the events and situations, the characters, the representations of familiar things, etc.).
 Think about what are the opposites to the things you were just daydreaming about. For example if you were daydreaming about being rich and famous then the opposite would is being financially unstable and unacknowledged. You'll quickly realize a lot of the opposite things in your daydreams reflect shameful, worrisome, fearful, etc. thoughts you have (anxieties). Your daydreams are a conscious reaction to your subconscious thoughts.
 Think about the characters or representations of familiar people, things, and places in your daydream. Look for fallacies, exaggerations, and inconsistencies. These will be especially noticeable with the familiar which will be behaving more like your ideal or opinion of them rather than how you actually experience them.
 Attempt to start a new daydream about the issues you uncovered in step 2 (the opposites), and attempt to willfully avoid fallacies, exaggerations, and inconsistencies. You will likely find this very difficult and will likely feel anxiety and tension building up as your conscious tries evading these uncomfortable thoughts, but stick with it and keep trying. What you will realize is that this second daydream isn't accompanied by the general euphoria of a more pleasant daydream.
What I believe these intentional (willed) daydreams are is an attempt by the subconscious to get the conscious mind to address issues it keeps avoiding. It does so by presenting the issue in a metaphor to the consciousness, things are exaggerated and opposite to make the thoughts comfortable and pleasing so that the consciousness will gladly process them and unintentionally resolve them (but gradually). The deeper and more traumatic the anxiety, the slower the process to resolve them and the more daydreams the conscious mind is passed (in order to keep it working on the anxieties).
The consciousness starts to panic when it becomes too aware of the unpleasant issues tucked subtly in the daydream which is why step 4 is so difficult. However, by becoming aware of this process and constantly examine your daydreams and subjecting them to steps 1-4 you will get in the habit of addressing your anxieties and actively working them out, lessening your subconscious' need to resort to dreams and daydreams as a means to get them through to the conscious.
I am having pretty good success with it and have gained a lot more control over stopping the daydreams when I want to and preventing my mind from shifting away from my external awareness. This does not mean you will lose the ability to daydream, it just means you will have better control over turning it off and on. Your subconscious is speaking to you, you have to acknowledge what it is saying to you and address its concerns if you want it to stop repeating itself.
Talking about decisivenes... Currently, one of my "imaginary teachers" (they're a device of consulting with my subconscious) had me to choose between living in MD and living without DD. Hard choice, but I picked the second. He told me that's good, as in order to get tolerable MD levels I need to aim for the extremes (zero DD). His advice has always proved spot-on in the past, and although this was my first "decisive" day I'm already getting results.
I believe it's gonna work, if I keep it up. Maybe being decisive is a big part of it indeed.
Let's see if it'll work, and for how long! I'll try both this and your method, John, for one full week, then post the combined results I got.
It's gonna be interesting!
Update: I gave your solution a try and it hurts. When I try to picture my reality and DD about it, it makes me feel very uncomfortable and brings back painful memories from the past. So I try to alleviate the pain with MD and it took my mind off of reality.
We tend to overreact when we encounter things we are unsure of, for example how many people react when they see a bee (as if it were a man with a gun coming at them) or when they are about to be poked with a needle at the doctor's office. Because of this, our memories are rarely 100% accurate, we remember things mostly by how we felt at the time rather than by what actually happened (this is why eye witness accounts in court are often unintentionally faulty).
Though your memories are painful, what it is you should try to accomplish is to separate what you felt from the reality of what actually happened. In doing so you can begin to look at ways the problem could be approached better or ways that the problem might be a result of what you were like at the time but irrelevant to how you are now.
If you've identified the fears and painful memories take the painful memories and try to examine them (through daydreaming) as if they were currently happening to someone else rather than being an event that happened to you (try to imagine this person as looking, sounding, and being different than yourself). Try to figure out all the different ways this person could handle these events. You will start to realize that these situations aren't the impossible traps they seem, you just didn't know the solutions at the time (or perhaps weren't in a position to solve them at the time).
It takes practice but the better you get at it the easier it will be to let go of bad memories that are holding you back and not develop bad memories from future events.
so your saying you daydream about rich then you should daydream about being poor instead? this will make you realize that you don't want to be poor and you that you should try your best to not be poor? so, as a result you should go to school and get a good paying job (doing this requires many more steps than your 4). so your saying the same thing i say on my blogs, that eliminating md is about accomplishing your daydreams in reality...
Suppose being poor is something you are afraid of. The concept of "poor" is pretty vague, the general gist of it is a lack of resources and a lack of means to adequately provide for oneself but what are the specific (to you) fears involved. We don't fear unspecific scenarios so much as we fear scenarios that remind us of specific bad incidences that happened to the past (this is how we learn to adapt, if we ate a plant that was poisonous in the past we will look to avoid it in the future as well as any other plants appearing similar to it, just in case).
So what about being poor is scary? Do you fear the social shame that can be attached to it? Do you fear you won't be able to find food and will starve? Do you fear it will lead to you living on the streets and you will be confronted with cold, crime, etc.? Nail down the specifics, chances are you aren't so much terrified of all the things that being "poor" can result in (even though most aspects are unpleasant) but some very specific things that have roots in the past. There have to be specific things in your life that have happened that make you feel what you are feeling now, you need to uncover these.
Dig deep, narrow things down and get as specific as you can, and find the events and challenge your beliefs about them. I don't think you need to accomplish your daydreams so much as you need to address what it is they are compensating for. Just because there might be things about being poor you are afraid of doesn't mean you need to be rich, it might just mean you need to challenge your beliefs about them so that you can realize you can survive being poor and adapt to it, in doing so the fear won't be so crippling and you'll have a much better chance at changing your situation over time.
I second that. Dreaming about a certain thing means you believe that way your life would be better. But what deeper needs would this thing cover? Answering this will give you the chance to find easier ways of fulfilling your needs. I used to dream about a lot of impossible things, but in the end I realized I only need to be more indipendent, communicative and able to stand my ground against certain cituations. I were afraid to become the person I wanted to be, and get the life I needed so I had pushed these "impossible desires" at the back of my subconscious. I have a long way to go, but my MD is getting obviously better now that I work on such things.
In the end, the DDs were always about the feeling of not being able to have something in reality. Fighting against my fears, both by confronting them head-on and by chasing what I need, has persuaded my subconscious that it doesn't need to push me as much into MD. I hope I'm not mistaken, but it really seems to work so far, and I'm getting better.
As with alcohol addiction, it may be that for some people, exercises like this are really helpful and resonate, and for some they are/do not. I think it's great food for thought, regardless.