By Cliff Clark
I'm pretty sure consistency is the number one goal of every trader, if it isn't it should be. I hear traders say it all the time “I want to be consistent”. But do most traders even understand what it means to be consistent and if they do, how to achieve it? It's not something that happens overnight and it won't just happen for those not putting in an effort.
To become a consistent trader takes a lot of time and effort. It can be achieved but with much hard work. Here are some tips on becoming a more consistent trader:
A trading plan is a must: To achieve consistency you must have a set of rules based around a strategy or set of strategies and a defined risk management system that can be repeated over and over again. These should be defined in a well-documented trading plan. You can't even dream of becoming a consistent trader without a trading plan. Having ten winning trades in a row doesn't make you consistent. That's called a winning streak. But did you stick to your rules while attaining those ten winning trades? Were all those ten trades based on patterns envisioned in your trading plan? Did you apply the same money management to all ten of them? How did your results fare when compared with your goals? Only then you can begin to determine whether you're consistent.
Have a daily routine: I have a defined routine I follow every morning. If you came to trade with me for a week you might think I had OCD. I get up, put the coffee on, and head to the bathroom to clean up, I then grab some toast, fruit, and coffee and sit down at the computer to read the newspaper, check email, etc. At about 5:30 AM (8:30 EST) I sit down at my trading computer and begin my day as a trader. Again, everything I do during that initial hour before the market opens is exactly the same each day. My trading activity is very repetitive. I do the same thing over and over again. That is one of the secrets of consistency. You can't expect to become consistent if you're doing something different every day. Your results can't possibly be consistent. I suppose if you don't follow my advice and develop a habit of losing you could also call yourself consistent, but I'm guessing that is not the type of consistency you are striving for.
Evaluate Results and Performance: Consistency is obtained by reaching your goals in a repetitive manner. The only way to do this is by evaluating your performance and results in a very methodical way. Are you focusing on quality patterns or do you tend to reduce your quality requirements when patterns are hard to find? Are you trading in the overall direction of the markets or against them? Which of your patterns have produced the best results? What time of the day has produced the most profitable trades? Are you taking your profits too quickly? Consistent traders are also very methodical as opposed to shoot from the hip type people.
These are just a few things you can use as you try to become more consistent. Becoming consistent doesn't happen overnight. It's a process that takes many years until your abilities, routine and skills can be honed to perfection. It's no different than any other activity that you will attempt in your life.
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
