June 18, 2023

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One of the hardest things about trading is to be (and stay) consistent.

Most traders struggle with this because they’re so compelled by short-term rewards or short-term pain avoidance.

Seasoned traders know this all-too-well: At all times, you have to be prepared for any situation the market might throw your way and be ready to do things you don't necessarily want to do.

And that's what consistency means, it means doing things systematically and independent of the kind of day you had yesterday and the kind of day you expect today.

For instance,

1. You got an entry signal but waited a little bit too long. The market is now leaving without you. Do you chase or do you pass on this trade?

2. You wake up and notice a gap down below your stop loss – do you close the trade or do you hold on?

3. You get a margin call – what do you do?

4. You’re in a drawdown. Do you reduce your size? Do you trade less?

No matter what you decide to do given these scenarios, at any given point, no event should surprise you and leave you scratching your head and thinking: “what should I do right now?”

The moment you’re making decisions in the heat of the moment, you’re at risk of having those decisions be motivated by your short-term reward-seeking or pain avoidance tendencies.

That’s why, before approaching any market, or any trade, you need an action plan. And, more importantly, you need to follow that plan consistently, or else your results will end up looking like this:

Instead of looking like this:

Behavioral consistency, not technical knowledge, separates the pro-traders from the amateurs.

It’s behavioral consistency that makes the magic (consistent profitability) happen.

The good thing is that consistency can be learned.

In fact, most living beings with cognitive abilities -- primates, elephants, dogs, cats, pigs, horses, birds, reptiles, fishes, etc., etc. -- can be trained to behave consistently.

So, it’s not just a feature of the human mind.

But, then, why is it so hard for you to be consistent?

Are you just someone with no discipline at all? Are you a hopeless case, condemned to perpetual failure as a trader?

Let me reassure you: You’re none of these things.

Here are the main reasons why you are not consistent along with some steps I suggest you take.

#1. You Forget about Consistency.
Yes, you forget. That’s the number one reason, in my opinion. It’s so easy to get sidetracked by emotions or noise in the heat of the moment and forget your intention to follow your plan.

Put a reminder note or some other visual reminder near your computer screen. Put up multiple reminders if you need to. If it’s important enough not to forget, it’s important enough to create these reminders.

Also, try setting up an effective morning routine. This is a great way to prepare yourself for the trading day. Consistently profitable traders have such routines for one main reason: It helps them get better at the skill of remembering to be consistent.

#2. You Don’t Take Trading Psychology Seriously.
You think that your current mindset is enough to make the magic happen. Somehow, you assume that consistency is going to be easy if you have the right trading system.

The reality is that it’s not that simple. Depending on the situation, we often have all sorts of biases and blind spots that cloud our thinking.

In the market, our loss aversion bias is the most common one. This makes us place greater value on a dollar we lose than on a dollar we gain. And people dislike the prospect of losing so much that often they'll choose to override a system with a positive expectancy just to avoid the pain of being wrong.

Spend more time studying the mindset component of this game. Subscribe to this blog if you haven’t already. Grab a good book on the subject on amazon, or enroll in the Trading Psychology Mastery Course.

If you want trading to be a truly fulfilling and profitable experience instead of being something that plays with your moods and consistently wears you down, don’t neglect trading psychology. Work on it. Give your mind the power to alter its own fate.

#3. You’re Not Fully Committed to Your Plan.
Very often, we just half commit to things, very much like the act of only being half in a relationship —with that kind of commitment, my guess is you’ll be out of that relationship pretty soon.

And it’s the same in trading: Your plan is there to protect you against yourself. You need it. It provides a structure for you to navigate uncertainty. It is thanks to that structure that you can achieve consistent profitability.

When you trade without a plan, you are asking for trouble. And when they come, they do so with deadly momentum.

Preferably, you'd want commitment and discipline to emerge from a profound understanding of what you're trying to accomplish, rather than having it be a mindless and unreasoned set of decisions.

So, do this: grab a pen and a piece of paper and write down with exquisite detail what you’re trying to accomplish and how. Decide right now if you really want to be consistent – do you want it enough to push into discomfort when things get difficult?

Following your plan should be viewed as an essential act, even though it's a struggle most of the time. In order to see it through, it's so important to believe that it will be worth it in the end —rather than doubting and judging how it feels in each moment. 

#4. You Have a Habit of Running From Discomfort or Uncertainty.
When the market does things that you didn’t expect, or that you expected but refused to acknowledge, things can get uncomfortable.

When things get uncomfortable, if you don’t know how to handle yourself, you will eventually shoot yourself in the foot.

Train yourself to see discomfort and uncertainty as a signal to practice ease and equanimity.

Our minds naturally (and habitually) want to get away from discomfort and uncertainty, but, in trading, this is a bad strategy.

It doesn’t help to panic and run when you’re uncomfortable. What helps is to FACE -- face your trade opportunities; face your losses; face your failures; face your successes; face your fears; face your discomforts; face your life.

#5. You Easily Give In to Temptation, and You Do it Out of Habit.
In the market, the potential to get rich quickly is omnipresent. Hence, people often experience the temptation to get into a trade with a larger position, even though they haven’t learned yet to handle that size (emotionally).

When your stop loss gets hit, there’s often the temptation to remove it. “I’ll just give it some more wiggle room,” you might think.

Actually, temptation is just a bit of discomfort, but your habitual response is to just give in. Your mind starts to rationalize why it’s OK to do what your plan tells you NOT to do. And so, you let the temptation rule your response.

Always approach trading with a plan, and unless you're a seasoned trader, never renegotiate it in the heat of the moment. Just don’t let yourself go there. As said earlier, you’re too prone to biases, short-sightedness, or just trying to get out of discomfort.

So remember this: tell yourself that you can’t renegotiate your plan in the heat of the moment.

Last Few Words

So, those are the main reasons why you are not consistent. Of course, there are others, and I’ll explore them in future posts.

As you see, the antidotes I offered are not all that difficult to implement. If you just consciously decide to do them and then take the right action to remember them, you are bound to create more consistency.

Hope you enjoyed this preview of the Trading Composure Newsletter.

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