Trade More Consistently – Like A Professional In 3 Easy Steps – Guest Post
Do you find that your trading results are not as consistent as you’d like? Are you wanting to confidently repeat when you have winners? Of course you would! Goal #1 in trading is profits. Goal #2 is then making money consistently. Third is steadily increasing profits.
Your trading profits are primarily the result of what YOU do, much more than what the markets do. There are traders profiting every single day, so blaming the markets is simply an excuse. If you want to profit consistently, then be more consistent in what you do in your trading.
First thing to understand is that trading is a repeated activity. That’s why making use of a good trading system is so vital. When it comes to making improvements in a process, and especially when your goal is to realize more consistent results, the three steps below are ones you can take to realize the most substantial impact on your consistency.
Step 1. Clearly define and write down your system. One of the more common errors made by traders, particularly regarding consistency is that they don’t have their system well-defined and written down.
When you have a procedure that isn’t documented, there will probably be inconsistencies in how the task gets performed. The reason the military is so big on procedures: they insist that things be done in a standard, reliable and predictable manner. The same is true for how you trade.
Step 2. Analyze your trading system’s critical factors. A wise man once stated that in order to improve anything, you must begin by first measuring it. How else are you to know if you’re actually improving? With trading you have several calculable aspects that make the bottom line what it is, in addition to the all-important account balance at the end of the month.
Most every business has certain aspects that determine the profitability of the business. Smart managers know to monitor those aspects and assign metrics to them. It is critical to do this because through a calculated analysis of these factors, you can then see specifically where to focus your efforts to make specific improvements.
Step 3. Make improvements in a controlled manner. Once you’ve conducted an analysis of your system, you now have the ability to focus on specific facets of your system to make improvements. By utilizing system analysis, you can modify your system and test – with zero risk – either through back-testing or in a demo account and see if the change improves or hurts the system’s performance – in the specific area you seek.
To give you an example, suppose you run the metrics on your system and find that your winning percentage is currently 48 percent. You’ve got an idea on how to improve it to 55 percent, which you “think” would increase your overall returns. Next would be to run the analysis on the system with the change on real market data. By looking at the results, you can see if this change indeed did what you expected, but also if it adversely affected other aspects of your system performance, such as a lower profit-to-loss ratio. You then can make a calculated decision on whether you should incorporate the change or not.
Conclusion. Trading is a process from which you wish to have consistent – and reliable – results. Spotting, entering and executing trades is an activity that you do regularly, so consistent profits is your goal, focus on making your actions consistent.
Step 1 is to make sure that your system is clearly defined and documented. By clarifying your system and then documenting it, you improve your likelihood to repeat what you do consistently.
Step 2 is to measure your system for a baseline of where you are now versus your desired goal. This also let’s you see where to focus for improvement.
Step 3 is to track these measurables and take steps in a meticulous manner and keeping your risk very controlled.
There are a handful of metrics regarding your trading business that directly determine your profits. By measuring your system’s performance and paying particular attention to these measurables, you give yourself the best means to increase your profits. Also, this will dramatically improve your ability to consistently produce profits.
Brian McAboy is a trader, trading coach, and business consultant and author of Inside Out Trading.