Seeking Consistency

Becoming a consistently profitable trader has always been a goal we strive to help our students achieve.  This starts with one simple principle, follow a consistent set of rules from our Core Strategy and let the market play into our hands, rather than playing into the market’s hand. Because one thing is certain, the market will be different today than it was yesterday which is one of the single biggest reasons trading is difficult for so many people.

So let’s tackle this idea of consistency as we give thanks for all we have and all that is good this time of year. We’ll start with the challenge that being a trader requires us to be the static object engaging in a world in motion that we don’t control and wanting to deploy capital to profit from picking the right direction after we put the money at risk. It’s actually as tricky as it is simple when you really sit back and think about it. Unlike when you jump in your car and go for a drive where you’re in control, trading is more akin to, let’s say, putting your kids on a bus in a foreign country where your kids don’t speak the language, someone else is driving, its in the mountains where they don’t know compass directions, and the destination, should they arrive, is a nice villa, overlooking the ocean that you get to own if they can simply, somehow, get to the destination. The reason I attribute this lesson to kids is that a parent would be terrified to take this risk without some degree of certainty (well most parents) and would want to take every measure possible to ensure their kids arrive safely. Yet people put money at risk every day, with or without skill, rules, or a risk management plan, most of whom had no plan other than the hopes of getting lucky, and then wonder why things didn’t work out.  

The market will travel in the same direction for everyone but some will profit and some will lose. Why? Some picked the right direction, some the wrong direction. Some had a stop loss, some just hope. Some people got lucky this time, some did not. Some had a plan for checking in to ensure the bus is still heading in the right direction, some did not.

So what can you do to put the odds in your favor?

There’s an age-old saying, the best way to learn French is to go to France for a while, immerse yourself. And trading? Our students know is best learned from traders while trading. You can be taught a language, you can be taught to learn to read a map, you can be taught to read a compass, and these days, as Beth Dutton said in a recent episode of Yellowstone, you can throw an airpod into their back pocket to track their route, all of which empowers you to ask questions, get answers, and use tools to increase your chances of getting the outcome you want, but one thing is certain, you can’t teach your kids to do what you don’t know how to do and hope things work out. So why would anyone think they should be putting money at risk in the market without the confidence of putting the odds in your favor, the first item of business being commitment to consistency?

Consistency begins with the idea of doing the same thing every time, regardless of your surroundings, while matching your rules to your surroundings rather than looking at your surroundings and trying to do something different in response to the surroundings.

When you put your kids on the bus, did you notice that the bus was pointing up a hill or down a hill? Could you see behind you that you’re down in a valley at the start of a new journey up the mountain or are you somewhere up the mountain when you start, expecting the road to climb higher? That’s all the easy part, the part we refer to in trading as looking left. There is enough information to the left on a chart to give you everything you need to make consistent, price-based decisions about where to, let’s say in this case, buy, to pre-determine risk and to gauge, with some degree of certainty, potential reward.

The hard part, the clouds up above preventing you from seeing that mountain above, the unknown outcomes, the uncertainty, the risk of being wrong, everything that clouds judgement and puts your rational mind, in need of evidence, to the test, is exactly why consistency in decision-making is so key to success. The conditions change every day, every week, every month, and every two to four years after an election, yet your ability to succeed doesn’t require an ability to change your strategy with every passing change in the market! It would take you too long. Some of you reading this may be in your 20s or younger so I suppose you have more time than the rest of us, but you don’t have to wait to get to the prize by learning every possible strategy for every possible market condition. You can be certain that’s a ten to twenty year, or even endless journey, extended only by not locking in on one plan, one set of rules, one way of finding high probability, high reward, low risk setups in the beginning and waiting for the ever-moving, ever-changing market to come to you. Many people become discouraged and give up way too quickly when they try to apply a set of rules and get stopped out or doing stupid things like over-leveraging, over-trading, or both!  All the while, not getting into the next trade, using the same setup that you’ve seen work often enough and for enough profit to make up for the “minus one” losses along the way. If they were your only child you’d probably be more afraid of putting them on the bus than if you had a thousand children. You know, the old saying, only risk money you can afford to lose? Well, why don’t you start by treating money with as much care as you would your own kids, even if you don’t have kids, think of trading from the perspective of someone you care about more than life itself, who you are responsible for safe passage from point A to point B but allowing for mistakes along the way. Would you want the rules to be all over place? Would you want the rules to be so strict that there is no room for error? Or would you say that consistency and having the best chance of a positive outcome, based on experience, is the best approach?

So here are some ways to become more consistent, but only you can make it happen:

• Write a Trading Plan (and attend the Trade Plan Essentials course)! In that plan, set achievable goals.
• Codify your setups with precision and start with one single setup until its second nature for you, its ok (WD-40 has made a business out of being a one-trick pony).
• Write down your routine. Literally, write it down, every detail of your daily routine and see how closely you follow it on a daily basis. The practice of writing it down alone will open your eyes to your consistency.
• Implement safe but serious consequences for inconsistent behavior. I recently suggested to one of my favorite students who is a dyed-in-the-wool Democrat that every time she breaks the rules she has to donate $5 to “you know who”. Oh the pain!
• Surround yourself with a Mastermind group who is committed to the idea of consistency.
• Keep going to class. Unlimited retake privilege is often viewed by our students as a way to come learn something new from someone new. That was never the idea. The goal is to get better at sticking to and mastering the same strategy taught the first time, not learn new ones, even if it takes ten times!
• Take a break between trades to reset and refresh. Your trading account will thank you.
• Block out unnecessary noise. Learn to listen to and trust the market above all things. Everything known or knowable is in the charts. Everything else is noise.
• Above all things, stick to consistency of Risk Management. We call it, “commitment to minus one”!

Have a great trading day and happy holidays to you and your family from all of us at Trading Academy