The goal for most traders is to be consistently profitable in the markets. If you have been putting in the hours and are not seeing favourable results, chances are you have been doing it wrongly. We will be going over five key points to keep in mind to develop consistency in trading.
A Trading Plan
First thing first, do you have a trading plan? If you do not have one, please do yourself a favour and make one right now. There is a guide on how to create a personalised trading plan that you can find here. A trading plan is essentially a blueprint for your trading business. It provides a model in which every trading decision is made in an organised fashion.
Practice, Practice, Practice
Practice makes perfect. What a shock! Bruce Lee once said, “I fear not the man who practised 10,000 kicks once, but I fear the man who practised one kick 10,000 times.” Once you have a trading plan, it is time to drill it over and over and over again until it is ingrained in your mind. Practices can be done through demo trading, backtesting and even forward testing in the live environment. Demo trading is the perfect training ground for newbies as it does not put their own money at risk. Backtesting allows you to evaluate how well your strategy performed in the past and how you can replicate it in the future. In live trading, your capital is on the line. You can feel the emotions and develop psychological resilience.
Stick to One System
One deadly mistake that most traders make is system hopping. They switch from strategy to strategy without fully understanding how each strategy works and before they even have the chance to do extensive testing. Most traders are impatient and hope to see instant results. Once they encounter a few losing trades with System A, they turn to another fancy system advertised online. Therefore, most traders are stuck in what is called the cycle of doom. To achieve consistency, adhere to one strategy and become a master at it.
Always keep a trading journal. The majority of the traders overlook the importance of having a trading journal and are too lazy to do it. A trading journal is way more important than another shiny technical indicator or strategy. It provides critical insights into your trading. It contains the trades you took, things that went right, what mistakes you made and the patterns you discover in your trading. These are all valuable information for you to build consistency. Without a journal, you tend to repeat the same mistakes and it will cost you more time, effort and even money than to maintain a trading journal. If you don’t have a trading journal, get one right now. A journal can be online, but I enjoy writing down notes in a physical notebook.
Last but not least, have a structured learning plan. Build a routine and stick to it. Taking 20 steps in one direction is better than taking one step in 20 directions.
– Choose a time of day to trade, learn and test
– Choose a location dedicated to your trading activity
– Cut off distractions while you are trading, and enter the ‘flow’ state
All of the above creates an ambience whereby you will enjoy your trading experience.
Now that you know what you should do, start doing it now!