Do you find that your trading results are not as consistent as you'd like? Do you want to reliably repeat when you hit winners? Of course you would! Goal #1 in trading is profiting. The second is then consistent profits. Goal #3 is steadily making greater profits. Your trading profits are primarily controlled by what YOU do, more so than what the markets do. There are traders profiting every single day, so pointing your finger at 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 realize is that trading is a process. That's why having a proven trading system is so vital. If you truly desire to make improvements in a process, and particularly when your objective is achieve greater consistency, here are three simple steps you can take to realize the biggest impact on your consistency.
Step 1. Clearly detail and document your system. One of the biggest mistakes made by traders, particularly regarding consistency is that they don't take the time to make sure their system is well-defined and written down.
When you have an procedure that isn't documented, it is likely that there will be inconsistencies in how the task gets performed. The reason the military is so big on procedures: they want things to be done in a standard, reliable and predictable way. The same is true for how you trade.
Step 2. Analyze your system's critical aspects. A smart person once stated that for you to improve anything, you have to start with first measuring it. In what other way 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 your 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 track those aspects and assign measurables 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. Tweak your system through meticulous actions. Once you have an analysis of your system, you can now focus on those particular aspects of your system to improve it. By utilizing system analysis, you can make changes to the system and test - without risking money - either through back-testing or in a demo account and determine the true impact on the system's performance - and if there are any trade-offs.
To give you example, suppose you analyze your system and find that your winning percentage is currently 48%. You come up with an idea on how to improve it to 55%, 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. Evaluating the results, you can see if this change indeed did what you expected, but also if adversely affected other aspects of your system performance, such as a reduced number of trading opportunities. You then can make a calculated decision on whether you should stick with your current system or go with the change.
Summary. In your trading, you want consistent - and reliable - results. Spotting, entering and executing trades is an activity that you repeat on a regular basis, so if you want consistent results, focus on making what you do consistent.
Step 1 is to make sure that you have clearly defined and written down your system. By clarifying your system and then writing it down, you are more likely to repeat what you do consistently. Step 2 is to measure your trading 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 your metrics and take steps in a meticulous manner and without risking money un-necessarily.
There are several metrics in your trading business that directly determine your bottom line. Through analyzing your system's performance and paying particular attention to these measurables, you give yourself the best means to increase your profits. Also, this will provide a major boost to your ability to consistently produce profits.
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Did you know that it takes most traders an average of 7 years to reach the point of consistent profits? Do you really want it to take that long?
Proper system analysis and tracking can save you years of losses and frustration, plus resolve many trading psychology issues - if you do it the right way.
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