Consistency, one of the main roads that you see thrown about as something that you want to be, you need to be consistent if you want to be profitable, if you aren’t consistent with your trading you will only lose. Those are all phrases that you have most likely seen before, most likely multiple times. So what does consistently actually mean? It is defined as “acting or done in the same way over time, especially so as to be fair or accurate”, so this would mean that we need to trade the same way over a long period of time before we can be sure that our strategy works properly and that our strategy is actually profitable. This needs to be an extended period of time, not just a couple weeks that a lot of people think.
We are going to be looking at some of the different things that you can do which may help you to become more consistent. Some may work for you, some may not, some may seem completely irrelevant but that may be true for you, but not for others. As long as you can use some of these tips to help you stay consistent with your trading, it will be a big benefit to your overall profitability and can ultimately help lead you to trading success.
Know Your Limits
You need to have a good understanding of what your own limits are, this is more in regards to the money that you have available to trade. You often see horror stories of people borrowing money in order to trade, this is never a good idea and is something that you should never do. You need to be able to trade within your own means. In order to work out how much you can trade, think about losing the money that you are wanting to trade with, if it would have a negative effect on your life, such as not being able to do things you would normally do then this is too much, you need to reduce it down to an amount that if you lost, you could still continue to live the way you currently are.
You also need to be able to limit your total loss, at the start of each month, think about the maximum amount that you would be willing to lose that month, this should be less than your total account balance. If you were to hit that amount during the month, you should stop for the month and then use any remaining time to analyze and evaluate the trades that you have made in order to hopefully work out exactly where things went wrong and what you can change for the next month in order to hopefully be more successful. Once the next month comes you can begin again with a new loss limit, when you do become profitable, ensure that you are putting a bit aside each month in order to act as a reserve, helping to keep your account safe in the future should you reach our loss limits again.
Limit Your Losses
This goes hand in hand with the point we made above, successful trading often comes down to being able to limit your losses, this does not mean that you won’t take losses, those are inevitable. What it means is that when you do have a loss, it takes a smaller hit on your account capital rather than a big one. This is required if you want to be profitable in the long run, it’s simple really, limit your losses so that your profits can grow. If you are only losing a small amount with each trade then it will take multiple losses in order to overturn one of the wins, so you can technically have more losses than wins and still be profitable. This is how a lot of strategies work and how a lot of traders become profitable, even with an under 50% win rate, you can be a profitable trader.
You can use things like trailing losses in order to help reduce potential losses and to help you close trades at a minimum of break even, there are a number of other ways to protect yourself against reversals too and these are things that you should certainly be taking advantage of.
Trade with a Suitable Strategy
Understanding your strategy, the advantages of it, and the weaknesses of it is vital, but it is also just as vital that you trade a strategy that suits your own style of trading. If you are a relatively impatient person and like to take smaller and quicker trades (known as scalping) then there is no point in trying to use a swing trade strategy, it just won’t gel with your personality and you will begin to make some mistakes.
There are a lot of other aspects that you need to think about, things like the amount of risk that you are comfortable with, if you do not like risk, then risking a larger amount with each trade will cause you to stress, and a lot of it, s you need to be able to have a strategy that matches your risk preferences too. What would be beneficial would be to develop a number of different strategies that each suit your own trading style, this way you will be able to trade with whatever conditions there are with a strategy that you are comfortable with. It is sometimes good to get out of your comfort zone, but you do not want to do it with every single trade you make.
A virtue that a lot of people seem to lack, patience can be an incredibly powerful tool when it comes to trading, not just for making profits but also for avoiding losses. If things are quite in line with your strategy then you need to be able to wait. If the markets are very quiet and there is nothing to do, you need patience in order to not push yourself to make trades when you know you should not be making them. Sometimes it can go hours, days, or even weeks without a proper setup, are you prepared to wait that long? If you want to be consistent then you may well need to.
Stick with Your Plan
A nice simple one here, if you have a plan stick with it. If you do not, then what was the point in actually creating the plan? You made it for a reason so stick with it, as soon as you deviate from it, you will begin to start making bad trades and this will only lead to losses in the long run. So once you have made a plan, stick to it.
Those are a few of the things that you can do to help yourself become more consistent, some you probably already do so it is important that you stick with them. As long as you do these things, stick to your own plans and strategies, you will be in a good position for being more consistent in the future.