Why is it difficult to be consistent ?

[Goldmansucks]

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.

 

[tomorton]

I see a lot of people using multiple indicators and other 'filters' on trades, such as upcoming news releases, other markets, global economic situations, etc. Difficult to be consistent in your own analysis when you a) have multiple inputs, b) might give some of these inputs different weightings at different times, and c) are unable to see historically why you made a certain decision on a certain day in 2009.

 

[Goldmansucks]

I see a lot of people using multiple indicators and other 'filters' on trades, such as upcoming news releases, other markets, global economic situations, etc. Difficult to be consistent in your own analysis when you a) have multiple inputs, b) might give some of these inputs different weightings at different times, and c) are unable to see historically why you made a certain decision on a certain day in 2009.

Thanks Tomorton

I would put that under number 1.
a.)If my inputs were responsable I would have to analyse that.
b.)Discretion is dangerous whilst trading if not defined, so your weightings should always be the same. If these produce undesired results, change the significance you place on them or move away from them.
c.) Why would you need to look at your historical results ? Conditions in the market may be different today but your rules should be adaptable.

But I agree these are common reasons.

 

[meanreversion]

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.

 

[Goldmansucks]

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.

Yes an excellent posting.

That would raise another question. Why do traders find it difficult to stick to a trading plan ?

 

[meanreversion]

Because it's unnatural. When you're losing money, it's human nature to second guess or question the system.

For the most part, you SHOULD stick to your trading plan and probably things will turn around. BUT how do you know the market hasn't completely changed? You do need some kind of fail-safe circuit breaker.

 

[Goldmansucks]

Because it's unnatural. When you're losing money, it's human nature to second guess or question the system.

For the most part, you SHOULD stick to your trading plan and probably things will turn around. BUT how do you know the market hasn't completely changed? You do need some kind of fail-safe circuit breaker.

I would disagree with it being unnatural I would say it is habit . Yes this is true in the learning days. It is more to do with habit and how YOU have adapted to the learning curve. I am not sure if the market changes as much as how little we actually change.

Yes the trading plan is important and allows one to adapt. The main problem here is not the trading plan but the traders understanding. Most newbies make a trading plan and think that if they follow it they should arrive at success. That is not always the case because the plan is incorrect. There are moves in the market which they have not understood and dont know when they will be confronted by them. So they cannot compensate for this in the plan thus end up second guessing their own plan.

You cannot be disciplined if you are not completely clear or certain about something.

With this approach are they actually breaking the ciruit or just turning off the power to feel safe? The two are very different.

 

[wackypete2]

The more risk you take the less consistent you will be for a variety of reasons. Your emotions could get the better of you when using high leverage and even if you are profitable your equity curve will be anything but a smooth curve. More like an equity zigzag.

Peter

 

[Splitlink]

Yes an excellent posting.

That would raise another question. Why do traders find it difficult to stick to a trading plan ?

Because there are so many attractive distractions. No wise-cracks, please.

When one's plan is going through the inevitable bad patch he reads books, mags, posts on here, and wonders whether his persistency will be worth his trouble, or is he just being obstinate in his refusal to let go.

I am the world's Nº1 in being obstinate about things. I'm not sure where the cut-off line is, sometimes.

 

[4xpipcounter]

What kind of confidence do you have in your trading plan? If you don't have an unwavering confidence, and personally feel you have the best methodology in the world, then you will not be satisfied with your methodology, so you will want to deviate from it. Deviation leads to inconsistentcy
From the mental point perspective, you don't want greed to take over. I'm particularly addressing your margining. Be consistent with every trade. Set a standard on that, and do not deviate from it. This last point was not meant to imply you do. It's just food for thought if you do.
Meanreversion also made some excellent points that I would whole-heartedly endorse.

 

[4xpipcounter]

Good point! You can't forsake your plan just because you hit a bump in the road.
This is something personal, but I don't read books on other methodologies when things are going bad. I don't want others things cluttering my mind. Usually ,when things aren't going as swell as other times, it is me who is the problem, so I address that issue accordingly, and then get back into counting pips.
Obsitance!? There's a line to be drawn. Someone might disagree with how I trade, but no one will ever convince me I am wrong, because my methodology makes me lots of pips. Yet, I need to have a sense of humility about myself in knowing I will never scale, completely the learning curve in the Land of Forex. There are no degrees in this school, and "A's" are absolutely necessary on all the tests (Just a metaphor.). Therefore, it is necessary to keep open-minded to new ideas, and possible additional implementations to how I already trade.

Because there are so many attractive distractions. No wise-cracks, please.

When one's plan is going through the inevitable bad patch he reads books, mags, posts on here, and wonders whether his persistency will be worth his trouble, or is he just being obstinate in his refusal to let go.

I am the world's Nº1 in being obstinate about things. I'm not sure where the cut-off line is, sometimes.

 

[spy74]

Yes an excellent posting.

That would raise another question. Why do traders find it difficult to stick to a trading plan ?

I think one reason, especially when you're new, is that parts of your trading plan will often be "borrowed" from articles you've read and people you've spoken to, and not tailored to your specific personal risk profile.

The 2% rule is a classic...it sounds very good in theory, but when you start trading live and have 3,4,5 losers in a row, and your real $$ account is now down 10% or thereabouts you start losing faith in your set-ups and your ability to execute them, when they actually could be fine. What's really the problem is that you are a whole lot more conservative that you initially estimated and you should only be risking 1% or even half a % on each trade to start with....

 

[meanreversion]

Well what I've found as time has gone by is that I've adapted my trading strategy. This is really because when I started, I didn't know "everything". I think you always learn something new each day.. for me the changes I've made have fallen into two categories 1) reduce volatility of P/L (usually at the expense of expected return and 2) reduce trade frequency/logistical effort required.

I really fail to see how anyone can start off with a plan set in stone, and never adapt or modify it.. but subtle modifications, total alterations and simply not following a plan.. well, these are different but in some ways similar.

 

[meanreversion]

Here's an example.

USD/JPY.. let's say you've been happily trading it, either discretionary or mechanical, for a year or two.

Suddenly, the central bank intervenes, buying $10bio+ to weaken the JPY.

Do you

a) keep trading as though nothing's happened
b) stand back and wait

and if it's b), how long do you wait for?

 

[Black Swan]

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. If you swing trade you have to be (as far as humanly possible) constantly on message and adapt your lifestyle accordingly.

We all use the phrase "consistently profitable" but folk often under-estimate the power/importance of the first word; without the consistency of making yourself available, to take opportunities based on high probabilty set ups, the profit can never be realised.

 

[Goldmansucks]

Because it's harder than we think to be ultra disciplined, focused and dedicated in order to put a decent shift in.

Maybe that is the problem, we actually do NOT think. We just live by habit. If we actually applied some thought to some of the things that we habitually do, I am sure we would not do most of them in thesame way,if at all.

 

[Black Swan]

Maybe that is the problem, we actually do NOT think. We just live by habit. If we actually applied some thought to some of the things that we habitually do, I am sure we would not do most of them in thesame way,if at all.

when coaching sports I used to often state "don't think just do..." I often visualise that phrase in relation to trading...

It's easy to rip the phrase to bits if mis-translated but in a football context I explained it in the following way;

As a competent player, competing at a very high standard of junior or amateur football, you've reached a certain level of competence and your dedication/practice has made permanent (hard-wired) some of the attributes necessary for you to perfom..Therefore you should instinctively rely on your abilities and knowledge to make the right decisions, if you hesitate the moment may simply go...

 

[meanreversion]

Top level comments Black Swan.

 

[oildaytrader]

when coaching sports I used to often state "don't think just do..." I often visualise that phrase in relation to trading...

It's easy to rip the phrase to bits if mis-translated but in in a football context I explained it in the following way;

As a competent player, competing at a very high standard of junior or amateur football, you've reached a certain level of competence and your dedication/practice has made permanent (hard-wired) some of the attributes necessary for you to perfom..Therefore you should instinctively rely on your abilities and knowledge to make the right decisions, if you hesitate the moment may simply go...

I was doing some mercenary trading and making 20 % a week.I sat down to think about why I was making money and examine the potential risks, before embarking on it in a big way one has to be cautious and do some hard thinking.It worked fine when I was doing it without thinking,it fails when I start thinking .

Thinking makes you filter out trades , even profitable trades which seemed unprofitable on thinking about them were left out.The more you think the less you trade,the less consistent you become.

The best traders are mindless morons ,people who just follow trends without thinking.

 

[spy74]

I was doing some mercenary trading and making 20 % a week.I sat down to think about why I was making money and examine the potential risks, before embarking on it in a big way one has to be cautious and do some hard thinking.It worked fine when I was doing it without thinking,it fails when I start thinking .

Thinking makes you filter out trades , even profitable trades which seemed unprofitable on thinking about them were left out.The more you think the less you trade,the less consistent you become.

The best traders are mindless morons ,people who just follow trends without thinking.

lol