How Maintain Consistency and Improve Trading Results

[fast 10]

Consistency is about repetition....improvement on the other hand requires that a person obtain an better understanding of the subject at hand

Your comment brings to mind a second interpretation of the thread title. A transition from trading a good solid plan inconsistently to doing so consistently could very well lead to an improvement in trading results, yet on the other hand, one that already maintains consistency with a good solid plan is unlikely to make significant strides beyond the trading results one currently achieves.

 

If one already has a good solid plan and trades his plan consistently, one can still improve trading results without trading inconsistently. One can simply consistently trade a slightly altered and well tested plan.

 

I will say this though; I am out of my comfort zone on this issue. The plan that I follow has been molded, twisted, and tweaked into my own, but it's still nevertheless true that my success is a function of the fact that I have stood on the shoulders of giants. By that, I mean, I wouldn't be where I'm at today if not for the countless years of experience of others that have come before me. I did not reinvent the wheel, as it were. The reason I'm out of my comfort zone is that I'm not fully adept in the best process to make substantive improvements without also potentially undermining my current results in the interim. That being said, some common sense items like not making changes unless a statistically significant number of test trades have been run over a meaningful time period comes to mind, but beyond some back testing and forward testing, I'm not really sure what I can offer in the way of advice when it comes to trade improvement via testing.

[TheNegotiator 13]

I do understand how you’re using the term, but I would have to characterize your use as a stipulative use. As such, it’s customary to use single quotes when using a term in an unusual or alternative manner. So, although intuition doesn’t appear to be what you have in mind, ‘intuition’ does, as characterized by you.

 

That’s okay. It was never my intention to correct (or even appear to correct) you—a forum about trading perhaps isn’t the correct venue for such a thing. I just wanted to make sure I understood just what it was you meant by what you said.

 

Yes, this is not really the place and I believe you have understood my use of the word anyway . However, for the purposes of clarity, single quotations in UK English may be used for cited phrases. As it pertains to trading, it is my assertion that 'intuition' is just that.

Edited July 17, 2012 by TheNegotiator

[TheNegotiator 13]

In my opinion the best way to maintain consistency and improve trading is to see it modeled for you by a skilled practitioner on a day by day basis.

 

The second option is to "do it yourself"....and by that I mean...that as you encounter the inevitable ambiguities that present themselves during a trading day....you ask yourself "what can I learn from this"......you take notes, you analyze your responses to the data, and eventually you develop a situational data base that you refer to whenever you have to.

 

Consistency is about repetition....improvement on the other hand requires that a person obtain an better understanding of the subject at hand....If you are at the upper limit of your skill level, no matter now many "reps" you do, you still won't improve.....so my advice is to find a person who is better at it than you...and try to develop that resource....

 

Good luck

 

I think a "skilled practitioner" could help. However, the skill level and suitability of what the teacher is presenting to a student isn't always immediately obvious - especially when the very reason the student seeks help is because they do not have sufficient knowledge themselves. The other problem I see is that in many cases the material taught is about the strategy itself rather than the mental approach to the strategy which I believe is the essence of excellence. This could be because the teacher isn't that skilled, or because they do not recognise it in themself as the reason for their success. The other problem is often a teacher has a class of many students and simply cannot give the necessary time to individuals. However, having said all of this, an excellent teacher who is an excellent trader is likely to be beneficial to an aspiring trader. Either way, this thread is about looking at some simple key aspects to your approach to trading in order to improve your consistency and accelerate your development.

Edited July 17, 2012 by TheNegotiator

[wrbtrader 10]

Explaining to someone the in-depth details of a trade strategy, method is very different than teaching someone how to trade. The latter requires in person mentoring for extended periods of time for many months (at the minimum) inside the student's at home trading environment via the mentor trading with real money.

 

Simply, to teach how to trade is not a weekend seminar, not a webinar, not an online class, not a book, not a video, not forum message posts. In contrast, mentoring is student and mentor side by side in the students trading environment via the mentor and student trading with real money on the line...at the minimum. All that other stuff (books, webinar, weekend seminar stuff) can be used as follow-up to in person mentoring.

 

Therefore, that mental approach to the strategy or all that psycho mumbo jumbo can be only learned by oneself or taught in person by a mentor via extended periods of time as mentioned above (side by side while trading with real money in the students trading environment). Anything else (books, seminars, webinars, forum message posts, online meetings) is just follow-up and should not be used as a substitute for real trading experience (oneself or in person mentoring).

Edited July 17, 2012 by wrbtrader

[fast 10]

Either way, this thread is about looking at some simple key aspects to your approach to trading in order to improve your consistency and accelerate your development.

 

In regards to that, another couple areas for improvement sometimes include identifying filters and developing triggers.

 

We hear about set-ups all the time, but less often do I hear people discussing filters. A filter is something that tells us when to not trade a particular set-up. I am of the opinion that successful trading is not always about finding the best set-ups. Knowing when to stay out of the market (or to not enter a particular trade) can prove remarkably beneficial to a trader.

 

Let me give an example. If a swing trader is trading trend retracements, then there will be times when the market will behave erratically—whilst trending. For instance, if you're following a stock that goes into a retracement but does so with gusto (sometimes referred to as a vertical retracement), then having vertical retracements as a filter can improve trading results because more often than not, a vertical retracement leads to a complex retracement (an a, b, c pattern, if you will—where an even shorter trend will be in opposition to the dominant trend that you’re trading). In this instance, it would be best to wait until the complex retracement ends. Again, to have a filter is to have a reason to stay out of a trade that would otherwise still meet your set-up.

 

A second area for improvement is to work on our triggers. Having a set-up (with or without filters) is generally insufficient in a good solid plan. We should also have triggers that are separate and apart from our set-ups. Not all set-ups will trigger, so some will and some won't, yet in reading people discuss trading set-ups, they seldom mention the configuration of their triggers.

 

To continue the example of trading a trend retracement, a trigger could be the placement of a buy order after seeing a repeating pattern that shows up on one's cycle indicator. In any given instance, we may have several securities that meet our set-up but only a couple that satisfy our trigger requirements.

[TheNegotiator 13]

Definitely agree with those points. One of the best risk management tools available to all traders is their ability to not be in the market. Equallt you need to know when you should be in the market, taking advantage of certain conditions. Trade selection ties in with this but also covers additional information depending on how you trade, leading up to and during the setup.

[goodoboy 10]

The secret is to keep a trading journal that not only includes the technical’s and financials but also the psychological aspects of the trade.

 

Thank you. I am starting to keep a journal. Can you share some examples of " psychological aspects of the trade"? Do you mean like for each trade write, whether "wasn't patient enough", "practice patients here", "really dumb trade and got lucky", etc.

 

Just trying to see how to properly keep an journal the right way.

 

Thank you.

[steve46 12]

If a trader simply keeps track of their day, noting trades taken, the result and reason(s) for taking the trade, they might (if they take the time to review) start to see patterns in terms of how they think, how they select trades and if they are conscientious in documenting their actions, how they react to their choices....

 

In my most recent class I had students document all trades for one month. One of the most interesting things I saw from this exercise, was when one of my students discovered that whenever they took a losing trade, they tended to withdraw from the screen for quite a long time....seems that they were emotionally hurt by the loss and had to take a bit of time before they could come back to the screen....as it turns out this "time out" cost them quite a bit, because when they reviewed the data, it was clear that they were missing out on valid setups that often occurred only minutes later....once they started to see just how much opportunity they were missing, what they needed to do became clear to them...in time they were able to make the needed adjustment (to put their losses behind them) and move on....clearly keeping a record of their trades and their reaction to each trade helped them....

Edited July 21, 2012 by steve46

[fast 10]

Thank you. I am starting to keep a journal. Can you share some examples of " psychological aspects of the trade"? Do you mean like for each trade write, whether "wasn't patient enough", "practice patients here", "really dumb trade and got lucky", etc.

 

Just trying to see how to properly keep an journal the right way.

 

Thank you.

Example 1)

 

I didn't feel good about this trade at all, and the only reason I took the trade is because it just so happened to meet all my trading rules. I'm now glad I took the trade because it turned out to be my best trade of the week.

 

Example 2)

 

I found this one stock that was performing very well, but it just didn't quite meet all of my trading rules, but I felt that if I jumped on, I could make a quick buck. I can't believe that stock fizzled out right after I entered.

 

Example 3)

 

My stock gapped up putting me into the green. I decided to stay in only for a short while longer because I felt that I was nearing the end of a trend, so even though my trading rules said to not exit, I got nervous and bailed. Man, I wish I would have stayed in because that stock just kept climbing all day long.

 

Example 4)

I can't quite put my finger on it, but I really expected this stock to do very well. It did alright, but no where to the extent I thought it would.

 

 

The examples are only a snip-it of what might serve as a complete entry. Basically, you want to keep a diary that answers why you got in the trade (the technical set-up and any other such mentionables), your thoughts and feelings (the psychological component and any expectations or anticipations), and in what ways you deviated from your plan (your mistakes).

 

Keeping a comprehensive trading log (or your trading diary) won't help you much until you've done it for a little while.. When you start going back and reading your diary and checking it on a frequent basis, that's when it'll start to spit out gold bars. See, you'll realize things about your behavior that you did not know. Man, I knew I made that mistake a couple times, but I had no idea that I did it that much. Gee, if I wasn't doing that, I would have made a lot more money. Gosh, I'm glad I started writing this stuff down because I'm starting to see patterns about what I do that I did not know.

 

The point of all this is so you are more in tune with your tendencies that may either go unnoticed or minimized. What most traders will find is that they can’t trust their own feelings most of the time. After you have a good solid plan that's been sufficiently tested, your odds are better when you trust your own ability to follow your plan than to rely on that sense you get when you think everything looks a certain way.

[SIUYA 11]

Thank you. I am starting to keep a journal. Can you share some examples of " psychological aspects of the trade"? Do you mean like for each trade write, whether "wasn't patient enough", "practice patients here", "really dumb trade and got lucky", etc.

 

Just trying to see how to properly keep an journal the right way.

 

Thank you.

 

adding to what Steve and fast say.....you are looking for patterns in your own behaviour that are both good and bad....

 

there are at least three mental aspects that are worth recording.

1...pre trade.

what were you thinking. did you want to follow the rules, break them, go against the trend, or just go with it. Were you feeling bluuih, bearish, was their something in the back of the mind worrying you, did you feel the need to rush in...etc.

2...during trade

did you feel comfortable, did you feel like taking profits, getting out earlier, adding to the position, cutting and reversing, when it did not go for you straight away did you start moving stops, TP etc....

3...post trade.

should you have left it alone and followed your rule, or did you do better breaking them? did you feel you did a good job of it, did you suddenly feel more comfortable exiting the position, did you suddenly feel I can master this and that I control the markets (a bad sign)

did you immediately look for the next trade, want to reverse get back in again, walk away, feel flat/uplifted etc.

 

Any thing works and everyone is different the point is the same....work out what works for you, and do more of that and less of what does not work.

 

example - sometimes I feel like exiting when i have a position going for me immediately after a string of losses just prior to it. When it gets to BE (for the string of trades) I often feel i want to exit. Time and experience has shown me, to let the profitable one ride, as that BE more often continues well into profit. The reason being, the X losses before hand finally saw the trade work...why stop now.

Exiting - all it does is get you to BE to make you feel good that "you were right", - whereas, the losses have already occurred.They are history....this is now and the trade is working.

[SIUYA 11]

Just reading an article in the paper.

 

But wait, there's more: why it's good to procrastinate

 

It is basically about a book "Wait", Frank Partnoy

I have not read it but I will as I like this stuff and imagine it is particularly relevant to maintaining consistency and improving trading results.

 

(I might add this should not be seen as an encouragement to wait until the time has passed....chasing trades will more likely do more damage to the account than waiting.)

Edited July 23, 2012 by SIUYA

[Rande Howell 10]

Unfortunately, the few discretionary traders that do "journal"...are primarily imputing entries/exits only. Same info they can get from their broker statements. Therefore, the journal becomes useless for feedback. Fewer will include charts...yet...the charts don't reflect what the price action looked like at the time of the trade nor do charts show how the price action, market, at home/office trade environment impacted his/her trade decisions.

 

Also, most are unable to journal beyond a few months for whatever reason.

 

So yeah, few know the importance of a journal, fewer will do it long enough and fewer will do it properly. In addition, in my opinion, traders should be able to select any trading day in the past and know how they felt before, during and after trading...know what was occurring in the home/office environment the day of trading, market events et cetera. All of that stuff you won't find in any broker statement.

 

Journaling, in and of itself, is kinda like keeping a diary. Depending on the observer of the journal, the journal becomes useful or it just becomes another item on a check list that doesn't help you to learn. I ask my clients to journal with specific questions to help develop the capacity to observe self while trading. What is the thought saying? What emotion is attached to the thought? What part of the self (beliefs) does that emotionally laden thought come from? What is the evidence (or not) that supports the automatic assessment? Is it true? At the core, the trader needs to be examining his resident beliefs about his capacity to manage uncertainty.

 

Applied to specific phases in trading, journaling like this, gets to the beliefs and emotions behind performance. Most traders remain mindless and don't recognize that there is always an internal struggle possible in the mind. Getting to the substance of that conflict allows the trader to begin to the develop the mind that he or she bring to the performance of trading.

 

Rande Howell