Why is it difficult to be consistent ?

[bbmac]

If you are failing to achieve consistency as defined in my posts above, you have to identify why-it's the first step to solving it....it will be for one or both of two broad reasons

1. Your trading edge actually down't achieve an overall gain over a sample (s) of times it develops,. no matter how good you are at implimenting it.

2. Your trading edge does indeed produce a gain over a sample (s) but you cannot execute the plan you have for doing so.

It may be that a trading edge idea works better within certain optimised parametres, ie maybe having a 5:1 r:r target actually doesn't achieve as much of a gain as 2:1 for eg...

Assuming though that your trading edge is soundly based and proven to produce a gain on paper or demo across a large typical sample (s) size, the reason (s) for failing to be consistent can only fall into no.2 above, and will generally be one or more of the sub-reasons below;

i. You cherry pick when to act at your trading edge, ie sometimes you inexplicably (some may call it instinct-but instinct is not the tradiing edge [unless it is-lol!] ) pick which to trade and which not to trade, thereby interfering wioth the natural laws of probability and outcome associated with a trading edge, which is as we all know, is just a set of cirscumstances that suggest a higher probability of price ultimately moving one way or another with a stop and target we have set. Interfering with this natural flow of the trading egde inevitably leads to 'sods law' kicking in whereby the ones you act on will be the losers, and the ones you don't won't !!

ii. You fail to act each time the trading edge sets-up because of a drawdown situation through fear of adding to the drawdown

iii. You do act each time the trading edge sets-up but cut the winning trades too early probably but not always as a result of a fear of a winning trade turing into a losing trade (another losing trade-re ii. above.)

Part of the possible solutions to these problems are contained in my posts above (know thyself and thy trading edge and what it is capable of and capable of expsoing you too) and I will discuss others in a seperate post anopther time. (it is late now.)

G/L

 

[oildaytrader]

Most of the inconsistent traders do not take early profits , they ride winners until they become losers .

Taking smaller profits can make a trader more consistent with lower drawdowns. One trader waited for 200 pip days to close and another waited for 50 pips , the trader with 50 pip targets was able to achieve it more regularly, whereas the 200 pip trader achieved it only when conditions allowed.

This challenges the positive expectancy of a system/method, because trader is taking profits lower than his losses, but his win rate is much bigger

http://tradermike.net/2004/05/trading_101_expectancy/

Let us for example say

A trader has a hit rate of 7 pips ,100 times a day , but his daily losses are 20 pips *30 tines a day, equals 100 pips daily net profit on a regular basis.

The equity chart of the 7 pip man will look more coexistent than the more profitable trader .There is more consistency in his profits.

The old forum farts will knock the 100 trades man as working for his broker.The mean farts will throw tomatoes at 7 pip profit man with 20 stops,though his expectancy is higher.

 

[meanreversion]

Quality posts from bbmac, the usual steaming horse p1ss from ODT.

 

[meanreversion]

Let us for example say

A trader has a hit rate of 7 pips ,100 times a day , but his daily losses are 20 pips *30 tines a day, equals 100 pips daily net profit on a regular basis.

The equity chart of the 7 pip man will look more coexistent than the more profitable trader .There is more consistency in his profits.

The old forum farts will knock the 100 trades man as working for his broker.The mean farts will throw tomatoes at 7 pip profit man with 20 stops,though his expectancy is higher.

Honestly ODT, do you even think about what you type, or is it a random stream of consciousness?

So the guy who trades (in your example) 130 times a day is more consistent, because he is making a net of 100 pips.

So let's see. Aside from the fact he will burn out quickly from trading so much, he is making 0.75 pip per trade.

Typical bid/ask in FX is 1-2 pips, sometimes more depending on conditions.

This man, who is risking his own capital and bashing his fingers to the bone all day long, is making more money for his broker than for himself.

Do you REALLY think this is sensible or sustainable? I know I'm trying to have a rational discussion with you here, which is probably a waste of time, but please just think about what you are saying.

 

[oildaytrader]

Quality posts from bbmac, the usual steaming horse p1ss from ODT.

Just shows brainwashed people's beliefs,there is more relevance in steaming horse p1ss.I enjoyed post it.

Consistency is not about your edge,which may or may not work in some market conditions,it is about applying trading plan for a upward sloping smooth equity curve in difficult market conditions.

 

[oildaytrader]

Honestly ODT, do you even think about what you type, or is it a random stream of consciousness?

So the guy who trades (in your example) 130 times a day is more consistent, because he is making a net of 100 pips.

So let's see. Aside from the fact he will burn out quickly from trading so much, he is making 0.75 pip per trade.

Typical bid/ask in FX is 1-2 pips, sometimes more depending on conditions.

This man, who is risking his own capital and bashing his fingers to the bone all day long, is making more money for his broker than for himself.

Do you REALLY think this is sensible or sustainable? I know I'm trying to have a rational discussion with you here, which is probably a waste of time, but please just think about what you are saying.

Yes , it is sensible and sustainable,if he has a game plan with an edge .It is definitely sustainable in FX.

It does not matter if his broker earns 10 times more than the trader , as long as the trader makes his 20 % a week consistently.It would't matter if spread went up to 5 , as long as he made his 100 pips daily.

If he made 0.75 pips , and his broker made 15 pips, so what?

 

[meanreversion]

Yes , it is sensible and sustainable,if he has a game plan with an edge .It is definitely sustainable in FX.

It does not matter if his broker earns 10 times more than the trader , as long as the trader makes his 20 % a week consistently.It would't matter if spread went up to 5 , as long as he made his 100 pips daily.

If he made 0.75 pips , and his broker made 15 pips, so what?

So, this man should put his capital at risk and work as a slave might, in order to generate larger profits for a broker who is neither risking capital nor doing any work?

Hmmm, I'm more convinced than ever that ODT is a sentence generating robot.

ODT, what day of the week is it today?

 

[oildaytrader]

So, this man should put his capital at risk and work as a slave might, in order to generate larger profits for a broker who is neither risking capital nor doing any work?

Hmmm, I'm more convinced than ever that ODT is a sentence generating robot.

ODT, what day of the week is it today?

Why do people worry about what is on other people's dinner table,you are only gonna eat what is on your table?Why don't you be content with what is on your dinner table?

I am making a thousand % a year but I am not going to do because the brokers is earning more than me, I would rather be a loser.What is the problem with this statement?

 

[JediTrader87]

Because it's harder than we think to be ultra disciplined, focused and dedicated in order to put a decent shift in. For example, if you day trade exclusively you have to be at your station day after day, month after month, taking the rough with the smooth, during the hours you've established as the most active in your chosen market.

To address the segment you made about always being there I must say I am beginning to think this is an example of poor discipline. To be human means we go through cycles, ups and downs. Regardless if you are executing your system entry/exits and are experiencing a rising equity curve you should not go sit at that desk every day. What if something happens in your personal life that leaves you a mess? Are you going to go back to that desk to escape? Do you think it will not affect your trading?

If so you will soon have a financial mess. Recently I read Trading Rules That Work: 28 Lessons Every Trader Must Master by Mr. Jankovsky. This is where your Trading Plan comes in. If something occurs in your life that will not have you thinking straight, then in your plan you should have a rule stating an amount of time taken away from the markets. Maybe a vacation will be necessary to clear your head and approach the market refreshed after said break.

My point is if you are a day trader you do not have to go to that desk every day the market is open. Unless financial exchanges do not exist when you wake up one day there will always be another opportunity. Don't forget it.

Take Breaks.

 

[Black Swan]

To address the segment you made about always being there I must say I am beginning to think this is an example of poor discipline. To be human means we go through cycles, ups and downs. Regardless if you are executing your system entry/exits and are experiencing a rising equity curve you should not go sit at that desk every day. What if something happens in your personal life that leaves you a mess? Are you going to go back to that desk to escape? Do you think it will not affect your trading?

If so you will soon have a financial mess. Recently I read Trading Rules That Work: 28 Lessons Every Trader Must Master by Mr. Jankovsky. This is where your Trading Plan comes in. If something occurs in your life that will not have you thinking straight, then in your plan you should have a rule stating an amount of time taken away from the markets. Maybe a vacation will be necessary to clear your head and approach the market refreshed after said break.

My point is if you are a day trader you do not have to go to that desk every day the market is open. Unless financial exchanges do not exist when you wake up one day there will always be another opportunity. Don't forget it.

Take Breaks.

er...OK...thanks for that...

 

[Prawnsandwich]

er...OK...thanks for that...

May the force be with you, young Swanwalker....

 

[tradingRAW]

I think consistent trading involves patience, persistant, and the use of high probability content selection. Tape reading is also critical as it tends to lead price action and not lag like charts. Trade cause there's a reason to. Once the content is there, execution will play a key role to profits or loss as intra day volatility tends to get the best of a trader.

 

[tommason]

i think money management is more important than just being consistent.
so 1. money management , 2. Being consistent.

by money management means knowing your buying power, how much u can lose ,etc

being consistent for me means scalping for lower ticks and to generate paycheck at the end of each week/month from my profit without killing my trading account.

 

[tradingRAW]

Money management is some what overrated just as diversification because from my experience we are not here to get lucky. Sure in a trade we try to minimize losses etc. But making money consistently is all about solid skill develop, not all trades are clean, many times you must work it until the stock smooths out and then go for the kill with size....in the end trading is like a sport and to win you must over come your opponent. I think its difficult to be consistent because traders expect easy clean trades when more often than not money is loss before a trade works and your ability to deal with it plays a critical role in your ability to be up or down for the day.

 

[FX Bandit]

Poor discipline and laziness.

Simple.

 

[tommason]

in my case money management is number 1 because I do scale (avg down and up) a lot and I do not have >40k in my account to absorb big losses & bounce back. so it is not overrated for me

 

[predator001]

I have read on many threads,forums and books about consistency. I would like to discuss with other traders why this is such a big issue and what one can do to improve it. Personally I put consistency down to two things:

1./ Technical knowledge and skills - I think this is the most important, above all else.
2./ My own mindmap of how I analyse and execute my trades.

There are probably a few more factors that I may have overlooked for now so it would be interesting to see where others continue to fail.

I was about to jump in with my two pence worth, before realizing that I dont have all the facts to answer your question satisfactorily. At the risk of appearing overly pedantic - you need first of all, to provide the following information:

1). what is your definition of consistency ? (not changing at all, or changing slowly within a given threshold, over time)?
2). what are you are measuring/monitoring for consistency (consistent trade placement/execution, consistent period returns ...?)

 

[jamil005]

AVOID JUMPING TO CONCLUSION.... GIVE SPACE TO ALTERNATE OUTCOMES ... MAKE TWO OPPOSITE PERSONALITIES OF SELF AND BE YOUR OWN JUDGE TO CALL THE VERDICT….
(Avoid to be bias, because as being a judge and jury it’s your duty to listen to both of your own selves which comes with two different decisions)
Again avoid giving verdict in one court session other wise you will be unable to listen all of witnesses and observe evidences

 

[tradingRAW]

To be consistent is about having skills to handle what ever the stock throws at you. Once you have content down, skills will determine if your up or down. I've uploaded some videos on youtube to demonstrate what day trading really is. Its a competitive game, its you vs the price action. Its not going to be clean. You will be down but just like a professional athlete under pressure you dig deep, stay compose, ever more focus and come out on top! That's real day trading, solid skill development and a competitive nature.

 

[lote_tree]

It depends what you mean by "consistent". If someone has a set of trading rules and always follows them, their system or approach will sometimes be rewarded by the market and sometimes it won't. That to me is not inconsistency.

I would define being inconsistent as having a set of rules and occasionally deviating. This in itself might sometimes produce "consistent" P/L but is not a consistent approach.

I suspect people have difficulty being consistent = difficulty sticking to a trading plan, which is the hardest thing to do.

Good point..

So the next question becomes why is it so difficult to stick to a trading plan? Even if a million dollar trader was to give you his/her simple trading strategy to make money; why would it be so difficult for you to follow it?

Well, until you burn into every neuron in your brain that the next trade you put on has a 50-50 chance of producing a profit you will NEVER be consistent. Whether your trading strategy averages a 70% or an 80% win rate is irrelevant because ultimately you do not know and will never know what the outcome of the next trade is going to be.

The uncertainty factor is what kills new traders. From a very young age we have all been programmed to think in terms of cause and effect. I do A and B will happen. If I go to work (A), I will be paid a salary at the end of the month (B). Now here is the brain of a novice trader; I go to work as a Trader and put a trade on (A) and I will close it out for a profit (B). This is the cause and effect principle at play just before every trade for a novice trader. They want to be certain that the next trade will be profitable if they initiate a super duper high probability trade. They will have hundreds of moving averages, MACD’s, Stochastics, lunar cycles (Don’t ask, I couldn’t believe it myself), trend lines plastered all over their charts, and for what? CERTAINTY..

What they fail to realize is that the moment they put the trade on George Soros, Warren Buffet or Goldman Sachs could come into the market and move the market against their position and stop them out for a loss. Every trader from Paul Tudor Jones to the next guy/gal just starting out is unaware of the fact that there could be billions of dollars on the side lines just waiting to enter the market at any time to potentially destroy their positions in th market.

This is the uncertainty principle you have to get religious about if you want to make the grade as a consistently profitable trader; from a psychological standpoint. You will have to rewire your brain to; I do A and B or C will happen. Simple, if I put on a trade (A) I will profit (B) or I’ll get stopped out (C). If I get stopped out, I move on to the next opportunity.

"But NO, I must blame my trading system for my losses and get a new trading system". Can you see how this dialogue in a traders mind is draped in the cause and effect principle? If you can't then don't touch this business with a 20 foot barge pole and save your money or else the 5% who are memebers of this website will be waiting to take the other side of your trade with a gluttonous appetite to pillage your trading account until the very last drop.

Let me stress, this is just the first part to consistency. The second part is understating the relationship between win %, trade frequency, bet size and Risk/Reward Ratio. I’m not going to get into the second part because there is enough good information on T2W for this.

Anyways, happy trading......

LT