Consistency – When The Rollercoaster Stops
Consistency in Trading– When the Rollercoaster Stops.
Many traders experience trading like a rollercoaster of emotions, especially in their early learning journey. They find themselves in high peaks of euphoria as trades go extremely well. Then they plummet into despair as they are hammered by an uncaring market into a black hole in their trading balance. Trading success comes when a trader can acheive consistent results.
As time passes, many traders survive the learning journey, either through their own skill or with the help of a mentor or coach. Of the survivors, some learn to smooth the path of the rollercoaster, at least for part of the time. Others, however, do not and they continue to experience extreme highs and lows in their emotions.
Instead of these traders being in control of their trading, the rollercoaster of the market is in charge of them. As if they were locked into their seats, these traders feel a rush of excitement with every upward move and the dread of impending sudden plunges.
Riding a rollercoaster may be exciting in the short term, but living on it is exhausting. If a trader is tired and distracted, their attention for the market is limited. If a trader is feeling under pressure, they can miss essential elements of their plan.
Some proponents of the psychology of trading recommend becoming completely unemotional when trading. However, this is not natural for humans and so takes a lot of attention that could otherwise be applied to trading. Of course, it is possible in the short term, but emotion will leak through and this can be discouraging. Eventually, if you squash your emotions routinely, you can miss intuitive signals and your trading can become pedestrian.
There is another way.
If your results are inconsistent, you can bring this within your control. One of the hallmarks of expert traders is consistency in their trading results. They achieve this consistency through a number of ways.
First, they have a clearly written trading plan that takes into account bull, bear and sideways markets and they recognise signals from the market that indicate when to switch their trading approach between these. The majority of retail traders only trade to the long side and often get hammered when the market goes short.
Second, they know when to stop trading. If the market isn’t performing the way they would like, or if they don’t understand the market, they have no hesitation in pulling some or all of their positions out of harms way until they do understand. Novice traders don’t know when to stop, but experts do because they have experience.
Third, expert traders know that when they are off track, either they have had a string of losing trades, or something is going on in their personal life that distracts them and they will alter their trading accordingly to maintain their effectiveness.
Finally, expert traders are more than happy to back-test a system over extended time periods in order to prove the viability of a system of trading. We know of one trader who back tested a system for 9 months before making a single trade on it.
What to do if you are getting inconsistent results.
- Examine your trading plan. Does it reflect different trade setups for different markets and when you should switch your trading from long to short.
- What precise criteria you have that tell you to stop trading? If you don’t have them yet, you should develop them.
- What type of trading are you good at? You should be able to say immediately what setups work well for you and in what markets you trade best. Expert traders only do what works for them.
- Examine your ability to manage your state of mind. If you have difficulty maintaining your focus you should attend our clear mind training course.
- Consider your relationship with risk. If you are taking on too much leverage and risk (your positions sizes are too large) consider reducing your leverage and position sizes until you are achieving consistent results.
Trading involves risk and each trade has only a probability to success. All the expert traders we have spoken to describe periods of high stress and inconsistent results.
This can be overcome and there is an unlimited flow of opportunity in every market for the flexible trader who trades with clear mind and a structured trading plan.
You can learn to achieve consistency in trading. You can learn consistency in managing your emotions while trading and this feeds forward into your results. When you learn effective emotional self-management, the quality of both your on days and off days will improve. You can become comfortable with the occasional roller coaster ride because you know how to handle it.
Imagine knowing you can let your emotions run free, whatever the market conditions, because you know you can take appropriate action with yourself and the market immediately. This is trusting yourself. It frees you to give trading your undivided attention.
Your evidence will be more consistency in your trading results, automatic use of the skills in the Clear Mind Trading Course and a trading plan that you trust because you have tested it and it works.
Once you are consistently achieving the trading success you desire, whether it’s in Forex trading, CFD trading or equities trading, you can move towards the goals you chose when you first started to trade.
A useful reference book is Enhancing Trader Performance by Dr Brett SteenBarger.
