“If I hadn’t made money some of the time I might have acquired market wisdom quicker.” — Jesse Livermore
I received the following question from reader Angel:
Hi Mike,
I hope that my email finds you well. Trading has been going very well, and I’m very happy with my results. I love this business! Mike, I would like to suggest a blog topic for you. After observing several successful traders, I’ve noticed that they have an excellent rate of consistency. They have a long string of green days, with one or two red days in between. How is this type of consistency achieved? Does it come with time? How can a new trader become more consistent?
I would love to get you insight on this, and I’m sure that other would also appreciate the help.
Thanks,
Angel
Bella Responds:
Glad to hear you are loving your work. You deserve it!
Experienced traders have playbooks. We have if-then statements for recurring set ups. We only make these trades in our playbook and according to our if-then statements. Many traders do not have a playbook and/or cannot consistently follow their if-then statements. So really for us trading is just a game of math. Make enough trades where our win rate is 60-plus percent and our downside is one with an upside of five and it very difficult for us to have a negative month.
But there is something more. Experienced traders emphasize certain plays depending on the market. They adapt. So in a slow uptrending market they focus on buying pullbacks and breakouts. In a volatile market, which may have just started, they focus on playing the momentum. In a range bound market they focus on support/resistance and fade trades.
But then there is even something more. There are subsets for all of our plays. And through market experience we can tweak our plays to trade these subsets. So if a stock pushes above an important resistance level and then fails, we are short. An inexperienced trader sits there carping about how the stock failed to breakout, 50c out of the money.
But there is even something more. When I have a few losing days in a row I have a talk with myself. This is not written about very much in the trading blogosphere. I succeed as a trader because I view myself as a successful person. I will find a way. No matter how tough the market. No matter the HFTs, unpredictable reversals, or supposed market manipulation.
After these negative days I insist through focused mental preparation that I trade only my best set ups for the market I am in at the time. And I am not sure how many people are able to do this. Most succumb to their lowest common denominator. They bitch about their firm, the trading platform, the structure of the market, who they sit next to, their payout, the HFTs, GS, Greece, or whatever else makes them feel better about themselves but does nothing to improve their P&L. Instead of seeking a solution to their underperformance. Consistently I demand mentally and statistically that I am in the plays that make sense to me depending on the market we are in.
Thanks for the question. I hope that helped. And best of luck with your trading.
11 Comments on “Traders Ask: Consistency”
Excellent Bella, You hit on the basic formula for success. Identify and address any issues head on and assume personal responsibility for one’s fate instead of blaming outside factors.
Excellent Bella, You hit on the basic formula for success. Identify and address any issues head on and assume personal responsibility for one’s fate instead of blaming outside factors.
Thanks for another inspiring and supportive post Mike. A quick question… In a prior post, you explained that a new day trader should expect to trade for at least 6 to 12 months before they can hope to become consistently profitable. Can you also express this learning curve in terms of number of trades, rather than elapsed time? It would help sharpen future expectations for those of us not yet trading full time. Thanks again.
Dr. Steenbarger (www.traderfeed.blogspot.com) frequently wrote about focusing on your strengths as a trader. I’ve often wondering where the leaks are in my trading and not focusing on my strengths is exactly it. Analyzing my data, my numbers off the opening drive shows that I make money almost every day. Yet I’ve become so focused on trading the “entire day” that I’ve done nothing but lose my gains trying to trade other styles of trading. I’ve found out that I’m just really good at looking for a directional movement off the first 5-15 minutes and riding it. Maybe now I can consistently build my bank and then learn to get better.
Dr. Steenbarger (www.traderfeed.blogspot.com) frequently wrote about focusing on your strengths as a trader. I’ve often wondering where the leaks are in my trading and not focusing on my strengths is exactly it. Analyzing my data, my numbers off the opening drive shows that I make money almost every day. Yet I’ve become so focused on trading the “entire day” that I’ve done nothing but lose my gains trying to trade other styles of trading. I’ve found out that I’m just really good at looking for a directional movement off the first 5-15 minutes and riding it. Maybe now I can consistently build my bank and then learn to get better.
Excellent post Mike!!! Thank you very much! Your insight on playing different kinds of plays for different markets was very helpful. This is probably the best sentence ever written on how to establish trading consistency: “Consistently I demand mentally and statistically that I am in the plays that make sense to me depending on the market we are in.”
As a new trader in 2010, it seems that every 6 weeks I’m having to adapt, learn and analyze a new set of market conditions. As a result, I’m growing my “if -then” trading playbook plays and concepts; it so important to keep good records in this business. I’ve learned that on a macro level, going back and reviewing your statistical progress and fine tuning your game to improve those results is what is going to get you to another level faster…
Thanks Mike for another solid post!
– Angel
Excellent post Mike!!! Thank you very much! Your insight on playing different kinds of plays for different markets was very helpful. This is probably the best sentence ever written on how to establish trading consistency: “Consistently I demand mentally and statistically that I am in the plays that make sense to me depending on the market we are in.”
As a new trader in 2010, it seems that every 6 weeks I’m having to adapt, learn and analyze a new set of market conditions. As a result, I’m growing my “if -then” trading playbook plays and concepts; it so important to keep good records in this business. I’ve learned that on a macro level, going back and reviewing your statistical progress and fine tuning your game to improve those results is what is going to get you to another level faster…
Thanks Mike for another solid post!
– Angel
DJ,
Great question.
We noticed during 08 that our new traders progressed faster because of the market opportunities AND increased reps due to extreme volatility. SMB Training created a practice trading simulator, affectionately dubbed Secret Project X, a game changer in trader training, that allows traders to practice very specific trading set ups repeatedly. This will shatter their learning curve.
Mike
Eric,
Great work. Dr. Steenbarger has taught us so well to build off or our strengths. A next great question is: Can you find similar set ups to the opening drives during other market hours that make sense to you? Another is: Can you find more opening drive set ups to exploit? Finally: Can you trade them with more size?
Thxs for your comments.
Bella
Bella,
Thanks for the response. Great questions that I’ll use to add to my strengths.
Bella,
Thanks for the response. Great questions that I’ll use to add to my strengths.