Consistency is the Real Holy Grail of Trading

The world of trading is a strange old place. The retail trader is bombarded with information, knowledge and the promise of achieving overnight success that will deliver financial wealth beyond your wildest dreams and the perception that this is almost instantaneous, or at least in a short space of time. The convention is that trading will set you free - financially, socially and professionally. Is there any truth to these claims?

There is the occasional tale of glory, where a novice trader has bet big and it has paid off. However let me make something clear if it is based on a ‘feeling’ or the flip of a coin your luck will run out. If you rely on that kind of trading it is tantamount to gambling. Therefore on the whole, it is widely accepted that trading will not instantly set you free. Trading is a fantastic route to providing all the freedom I mentioned; however as with everything in life you have to put forth genuine effort. The inspiring aspect about trading is that it provides an equal opportunity vehicle to obtain all those freedoms, and with a low barrier to entry it can afford success to anyone who chooses to become a trader.  

Having said that, due to the constant barrage of ‘instant success’ ringing in the ears of retail traders it is difficult for some to travel the long and winding path to trading success. You need to change your approach and think of trading as a job that takes time, the correct application of knowledge, practice and most importantly patience.

Many traders become obsessed with a trading strategy, indicators, or the latest headline grabber to arrive in their mailbox. Remember, trading is about you, not the system. A trading strategy is not as important as the mindset you apply to it. There is always a chance you will correctly pick the direction of the market, but you may not make a lot of profit on the trade. Let’s consider briefly why this may be the case.

It is a fact that you need a trading system, and we will discuss this in later articles, however, as a general rule it needs to be clear, concise and does not need to have a whole host of indicators. The simple system that suits your personality will form the bedrock of your trading, which in turn offers you a fall back if things aren’t going so well. You have to be familiar and comfortable with it and trust it in order to build on it. Simplicity needs to be at the heart of your trading plan so that it can be easily interpreted and replicated as you put the pieces of the jigsaw together which is necessary in order to interpret the market.

Most importantly, more so than any other industry I have worked in, is the emphasis you must put on you. You are what makes or breaks your trading. You need to be focused! This means picking a time of day to trade where you can concentrate 100%. No distractions from family, work or day-to-day life. You have to start with the premise that commitment to trading is best done when you have the best environment, typically a peaceful and quiet time. This concept is difficult, as our industry portrays the trading being done from a tablet, phone and even a wristwatch. This is just madness and a marketing ploy! As other industries embrace the mobile digital revolution, the brokers want to offer the next best new innovation, but what they fail to mention is the doctor may be using his tablet for imaging or the teacher the cloud for classroom preparation, but the important execution of their profession are still done in focused dedicated environments. So why as a trader would you place a trade from your watch on the tube going to work?

So from this bedrock of a strong strategy and focus, you will need a 6-stage mechanism being: Discipline, Routine, Principles, Rules, Control and Patience.

Discipline is the overriding feature, of all 5 mechanisms and if your discipline falters in any area, failure is not too far away. You have to set up a system that suits you where there are consequences for not keeping discipline in any aspect. This is of course a personal choice; however, if you do not have the right consequences for lack of discipline for example such as to stop trading for the day or even the week or perhaps delay in buying yourself that treat then your boundaries can become blurred and you may lose focus. Working alone as a trader means you do not have your boss there to keep you in line. Mental discipline is difficult when you are sat there alone. Personally, I do not have a consequence system but I have a trading colleague, and he keeps me disciplined because I do not want to have to explain to him my conduct for not sticking to my rules of engagement when I took a poor trade.

As you read this you will hopefully find that all these mechanisms trickle down from the overall aspects of trading right down to pushing the button to trade. As routine is so important, your overall approach including when you trade to where you trade, all the way down to the procedure you establish when executing a trade will form the basis for a structured routine.  Your routine is a safety net, which is linked to the discipline which makes you commit to your routine every time. If you trade outside of your trading plan (routine) then it will more than likely be the wrong trade, a punt you have taken without forethought and yes you may get some big wins but consistently over time you will not be trading and you will not be set free.

You have to have principles in place. I love principles as they allow you to apply general laws to specific examples you see in the market. The principles you obtain through trial and error and experience give you the framework to execute well thought out trades that have the best chance of success and if they don’t you can analyse and grow and develop for the next time you see that particular setup. There are fundamental laws on how you would like things to work out. They provide the overarching principle you live your trading life by. These will start to bring success as they are developed from your beliefs that will drive your long-term behaviour of success.

These principles do drill down to specific rules within trading. They come from learning, obvious rules like do not chase a trade or always trade with a stop loss, to rules you develop over time, say on a mistakes sheet that you add to over time. But they are all created out of your principles to regulate the correct conduct when trading. All aspects are important but rules cannot be broken as breaking rules will lead to losses, because you now know that these are in place to keep you safe, from wild market moves, and more importantly yourself. The rules you adopt will be the guides to make consistent results. But you need to be committed to not breaking them or trading outside of your trading plan.

This leads on to the next factor of control. It is not easy to control your behaviour when you are sat at the computer on your own. You must have control because you can be drawn into the world of gambling. Trading is exciting, the movements, the money you are making, the discussion on forums or the buzz you have in your ear. But if you feel excited about individual trades you are in the wrong trade. It is acceptable to get enjoyment out of trading. Trading should make you a happy person but that is because you are excited about closing the trade when you have been in complete control of all your principles, rules and have closed for a profit. Getting excited if your analysis has worked even if your trade failed, sounds unintuitive however, if you have followed all your principles and rules then you are beginning to act like a professional trader. And a professional trader is always prepared to accept a loss as long as it falls within the parameters of their rules of risk/money management because then they can survive to trade another day and know next time it has a chance to succeed.  Control gives you the sense of calm and the knowledge that you are doing everything right to give yourself the best chance to make consistent wins and accumulate those pips so you can fulfil your dreams of financial freedom.

Finally, patience. Patience is the hardest aspect to obtain, patience that trading is a long game, and will take a while to master, all the way to patience within the trade. You have to let your process play out. Your principles will protect you; however patience will stop you from tinkering and hovering over the mouse and not letting your profits run. Do not rush and remember this, reason everything out from principle and rules and when you are within your trading plan and want to take the trade take a pause and just re-evaluate. This will ensure you are certain all is well and you are committed to executing your plan. The lesson of calmness and patience will accumulate pips. 

There is no holy grail in trading; consistencies are the only path to success to slowly and surely build an attitude of discipline and control to give you the opportunity to accumulate pips. This will reinforce your mindset of winning which will help you to form habits that will make your rules involuntary and this is what will lead to consistency and all the freedoms you can imagine. Add to that the lifestyle change you want for yourself. Move away from this and it leads to swings of big wins to big losses that lead to fatigue and failure. Therefore stick to the path of consistency and ignore all the marketing noise so prevalent in this industry and commit to a plan that will lead you to trust yourself to pick the correct information and knowledge, to make you a success.