Is Consistency In Trading Overrated?

With the laundry list of variables that people say are needed to succeed in trading, is being consistent often overrated?

From having sound money management that respects the expectancy of your trading system to having a trading plan, there are many things to consider.  Getting consistent trading results in a market where there are many participants can be difficult at times.

But it can happen and it does when you implement your trading edge exactly how you tested it.

In that sentence, is the answer to the question that is the title of this post.

Consistency Is The Most Vital Aspect For Trading Success

To be clear, that statement is made with the expectation that your trading strategy and plan has an actual edge in the market.  You can only know if you have an edge if you have tested and proven the strategy to be so.

The problem is that it’s potentially easy to fall into the trap of trading without a well-defined strategy.  The markets are moving, right? If they’re moving then surely you can catch some of that movement by just watching them and jumping in when they look good, right?

Maybe you can.

But if like most (read: all) of us you don’t make money on every single trade you take, you are going to want to know why you lose when you do, even if overall you’re profitable.

So what then?

You probably don’t keep a trade journal if your strategy is vague, so you go to your fills window or even your statement. You try to pick through your trades but there’s no clear pattern to them. A trade here because you felt one way on this day, a trade there because the market was breaking higher another day.

Without going through each and every trade and replaying them individually in your mind, how can you expect to get any information that’s of genuinely practical use? It is much easier to test performance and identify weaknesses of an approach if it’s well-defined and accurate records/journals are kept.

The only way your records will be accurate is if you were consistent in every thing you do in trading.

Consistent Approach Can Lead To Trading Improvements

The fact that you’re getting steady results is something you can lean on to improve your strategy. Over time you should be able to either make the necessary adjustments to turn the strategy into a consistently profitable one or work out whether it’s better to move on to something different.

This really is the most important aspect of having a consistent approach.

Working in this way may mean you won’t always get things 100% right and this is something you should not expect anyway, but what it does give you is a solid reference point and foundations to build upon.

It allows you to repeatedly practice the same routines over and over again in a similar way as a golfer may swing their club or a chef might make their specialty dish. It may not be exactly the same each time, but they become so familiar with the procedure and the variables involved, that in the end they are able to execute their plan and achieve the particular goal with far greater accuracy.

They’re much better prepared to make minor adjustments during execution in order to account for those slight differences and possible problems with their plans become much clearer to them.

Successful Traders Don’t Blindly Change

It’s not unusual for a trader who, for example, after seeing a market rally for days on end all of a sudden switches from fading a ranging market to being a trend trader. They don’t want to miss out on what looks like fantastic movement.

“Hang on” I hear you say, “isn’t that a good thing?”

  1. Knowing a strategy and its nuances within a particular market can make huge difference to your bottom line. So switching up to something different without having thoroughly practiced it already could spell danger.
  2. The chances are good that at some point the trend will end and you’ll be left holding the can. Markets move from balance to imbalance and back to balance again, in various manners.

So if you want to trade trends in addition to trading range extremes, it would be better to have a strategy for both and identify when to use each.

At the very least, if you stick to your range trading strategy and the market starts to trend, you need to identify this and hold back on trading it until the market moves back to range mode.

Traders Must Consistently Follow A Trading Plan

While most know they need a trading plan, it’s virtually assured that most do not.  We see it when new traders come to Netpicks and we speak about their previous trading.

But without a trading plan, how could you attempt to be consistent?  You can’t.

Once the trading plan has shown itself to be effective, you must not add any untested variable to muddy the water.  This includes a “gut feel” to skip a trade that fits your trading criteria.

It also includes not taking a loss when your trading system says that trade is not working.  A stop loss that is properly placed is not a suggestion to exit the market – it’s a rule.  Once your losses no longer fit the parameter set out in your plan and are larger, you have just skewed your trading system and are on the road to a damaged trading account.

What about switching instruments you are trading?

I think that your trading strategy should be robust enough to handle most liquid markets.  While markets may move differently, there are some mechanics of the market that are repeatable regardless of which you trade.

  • Market trend on occasion
  • Extended markets mean revert
  • Markets consolidate

Basing your trading strategy around those mechanics keeps you in line with how price advances and declines on a chart.  Yes, simple works in trading.

It’s Not Just How You Trade

Trading is about more than just looking for trading signals and banking profits. It’s about how you go about the business of trading and I think it is clear that going about the business in a consistent manner is vital to be a professional trader.

The sooner a ‘trader’ recognizes this the sooner they become a trader. If you can honestly say that your routine, your preparation, your strategy and your research are all on the whole pretty much uniform, your results will be largely consistent too.