A Simple 3-Step Sequence to Find the Holy Grail of Trading… Consistency!
I’m going to have a little wager with you today…
If you were to sum up your biggest trading frustration in just one word, what would it be?
A lack of consistency usually means the trader has a certain profit figure he’s looking forward to at the end of the week or end of the month, but for some reason he’s not hitting it on a regular basis.
Does it sound like a familiar story?
Now, a lot of the time this can be down to erratic performance on the part of the trader himself. He might be second-guessing trade signals, or messing around with stop-loss placements, or even trying to over-clock the system rules so it squeezes out more winning trades or eliminates more losing trades…
Yes, there are a number of methods you can get in your own way when it comes to finding consistency.
But the good news is they are all easy to navigate around. This means you can always cure your own personal trading frustrations once you know how!
So today, I’d like to share my thoughts on what I believe is a very common cause of trading inconsistency. And if this is something you’re struggling with yourself I’ll show you how a simple ‘mind shift’ will soon help you get things back on track.
The common error that leads to inconsistent results
When talking to traders with consistency problems, I’ll ask them to tell me a bit about their experience, the systems or strategies they’re using, and their results so far. What they tell me usually suggests something like this:
- They’re aiming to draw some kind of fixed result from their trading.(They’re focusing on making an exact 10 pips per day, for example, or a minimum 400 pips per month.)
- So they’re following systems/services that claim very high ‘strike rates’. (I.e. the number of winning trades is much greater than the number of losing trades.)
- But they have very little patience. (They jump from one methodology to another if they don’t immediately see the results they want.)
The problem is they’re setting their expectations incredibly high from day one.
Newbie traders in particular go after those systems that claim incredibly high strike rates. As an example, I’ve just found one advertised online that claims 93% wins over the last 272 trades…
It certainly looks impressive, but a high probability of a winning trade is no guarantee of consistent profitability. It’s only one part of the mechanism. We’d need to know how much the system makes on a winning trade and how much it drops on a losing trade to get a true picture of its profitability.
And even that’s only part of it…
Because many systems claiming very high strike rates actually lose money over time.
On paper they might have a good current strike-rate, but they also tend to be tightly fitted to current market conditions. It’s called recency bias: it means a change in market conditions can wreak havoc on the system’s performance.
We move from a bull market to a bear market or from a period of relative calm to sudden high volatility, and what looked like an ‘easy money’ system under favourable conditions is suddenly haemorrhaging pips at a rapid rate.
Our trader is now in a dilemma…
Does he ride out the unexpected rough patch and carry on trading, thereby risking losing a bundle? Does he pull the plug now and consider the system expired? What if he widens out the stop loss on his trades: will that get things back under control?
This is exactly the kind of situation leading to the frustration, hesitation, and system-jumping that creates inconsistent results.
So when presented with two trading systems – one claiming 93% winners, one claiming 40% winners, but both claiming high profitability – why would most traders tend to jump on the 93% system?
The thing is, even though more consistency may be available from the 40% system for the long term, it can be difficult to set your ego aside and accept you’ll be ‘wrong’ on 60% of your trade entries.
We want to be profitable AND have an impeccable record for accurate trades – as if we get extra marks for it or something!
So if accepting a lower-strike-rate system is something you’d struggle with, even though it may provide the consistent profits you ultimately seek, here’s something you might try…
Move your focus away from the day-to-day profits of your trades for now, and focus on entering and exiting the trades the system provides without worrying about immediate results.
I know it sounds like a bit of a paradox but that’s how you lock-down long term consistency. If you have a trading system with a long-term profitable edge – even a small one – and you can pull the trigger time after time, without hesitating or second-guessing, the money will follow as sure as night follows day.
Here’s a little 3-step sequence that you might follow to help you get there…
1) Assess: Do you have access to a trading system with a proven profitable edge? Has it shown consistent profits through a range of different market conditions (you might need to do some backtesting here to satisfy yourself that the system is reliable)?
2) Prepare: Be ready to make finding consistency your number one priority ABOVE ALL ELSE. Forget about individual trade results and money-making for now. Set yourself a future review point – after your next 30 trades is a good number to work to – and then put your plan in writing. Something like this: ‘Starting Monday 19th October, I will take every single trade my system generates without hesitation. My focus is purely on pulling the trigger and I will not second-guess the system or be concerned with the results. I will operate under these conditions for the next 30 trades and then review my performance.’
3) ACT!: On Monday 19th October – or whatever date you set yourself as a starting point – pull the trigger on your trades, and carry on doing so with discipline.
After you’ve completed your 30 trades, analyse how consistently you performed. Did you take every trade? Did your system’s positive edge play out for you as expected?
Once you’ve learned to let go, and handed the responsibility of making money back to your system, YOU should just be fulfilling the role of ‘machine operator’ – the man that pulls the handle.
And that’s when things can really start happening!
Be Prepared: Market Moving Data Coming This Week (London Time)
Wednesday 14th October:
09:30 GBP Average Earnings Index
09:30 GBP Claimant Count Change
13:30 USD Retail Sales
13:30 USD PPI
Thursday 15th October:
13:30 USD Consumer Price Index
15:00 USD Philly Fed
Friday 16th October:
10:00 EUR Consumer Price Index
Monday 19th October:
– no big reports
Tuesday 20th October:
13:30 USD Building permits
So let me know what you think about the whole issue of finding consistency in your trading. Better still, try the simple mind shift technique yourself and tell me your results.
Until next time, happy trading!
P.S. If you’d like to get your hands on consistently reliable Forex strategies, keep your eyes peeled for the next opening of Forex Breakthrough Academy – open to new students very soon!