Journey To Becoming A Consistently Profitable Trader  

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The ultimate goal of traders is to get to a point where they become consistently profitable in the market. This however, does not happen overnight. In fact, it takes some traders many years to get to this level, and unfortunately, some traders never realize it at all.

So what are the traits that lead to consistency in the market? Well, there are some common threads among successful traders that are worth studying. Below you will find a list of key concepts that can help you achieve consistency in your trading.

Pick A Strategy And Stick With It

The very first element to achieving consistency in trading is to learn a proven trading methodology and stick with it. There are many different types of market analysis techniques that you can learn about. Some of these will be based on technical analysis, while others may be based on fundamental analysis, statistical analysis, or sentiment-based analysis.

In the beginning you will have to gain exposure to as many different market techniques as possible, so that you can understand which trading style best suits your skill set and personal temperament. Once you’ve narrowed down the style of trading that best aligns with your own psychology, then you need to dive deep and learn everything that you can about the strategy.

This includes reading all relevant books from authorities within this specialty, taking advanced level courses, and engaging in coaching sessions as needed. The point being, that whatever trading strategy that you choose to adopt, you must eventually have the goal of becoming a master in that trading technique.

Now, one of the biggest problems that traders have is lack of patience. And this lack of patience is often seen in the inability for many aspiring traders to stick with a trading method for any reasonable length of time. That is to say that at the very first sign of trouble i.e. equity drawdown, these traders will look to bail on the strategy and begin the search for another method altogether.

This typically ends up being a futile search that leads to nowhere. The fact of the matter is every trading strategy or system will have its ups and downs. The sooner you realize this as a trader, the closer you will be to becoming a consistent trader.

Focus On The Highest Probability Setups

It goes without saying that you should focus on taking only the best set ups that the market provides. This is, however, easier said than done. Many times, our desire to constantly be engaged in the market leads us to make subpar trades.

The misconception being that a trader must trade frequently, and always have a position on in order to make healthy profits in the market. This could not be further from the truth. It’s not the quantity of trades that you make that matters, but rather the quality of trades that you take.

Most traders know from experience which setups serve them best in terms of providing the best risk reward profile. So, isolating that part of it is not that difficult for many traders who have been around the markets for at least some length of time.

The trouble comes when you have been sitting idly for some time due to a lack of market opportunities. It’s during these times, that we become most vulnerable in terms of trade selection. When there has not been many trades on our plate over the recent past, we tend to lower our standards and get drawn into taking trades that we normally wouldn’t execute on.

And so, we need to reign in those urges that force us to take these types of lower probability trade setups. When you begin to internalize the concept that trade selection is much more important than trade frequency, you will be on your way to focusing on those consistently winning setups within your trading arsenal.

trading-planCreate A Detailed Trading Plan

To get on the path to realizing consistency in Forex trading or any other market for that matter, you must start with a well-defined trading plan. A trading plan should detail every aspect of your trading business. This includes items such as your trade set ups, including entry, exit and trade management processes. It should also outline which markets that you will trade, along with the preferred time frames, and position sizing parameters.

In addition to this, a well written trading plan should include what your primary goals are for trading, including your short-term and long-term trading goals. There are many details that need to go into a trading plan. It should serve as your guidepost for your overall trading business. And although it’s impossible to address every known and unknown situation that could arise in the market, traders must attempt to address as many of these variables as possible.

Doing so will go a long ways towards becoming a more consistently profitable trader. This is because planning and executing your plan will help you to avoid trading from the hip. Instead you will have a set of clearly defined rules to follow that have been planned ahead of time.

Create A Trade Execution Checklist

A trade execution checklist goes hand-in-hand with a properly prepared trading plan. Think of a trading plan as the big picture view as it relates to your trading business, and think of a trade execution checklist as providing a more granular process for executing on certain details within your trading plan.

A trading checklist should be kept as simple as possible in order to avoid paralysis analysis. Essentially, a trading checklist should detail each step that you need to take prior to executing on a trade set up. This is extremely important because, although, we like to think that we know exactly what needs to be done prior to entering into a trade, many times oversights can and do occur. With a trade checklist, once you’ve ticked off everything on the list, you can confidently execute your setup in the market.

A simple example of this can be illustrated as follows – Upon identifying my bullish trade setup, I will 1) check the longer term support and resistance levels, 2) I will confirm that prices are trading above the 50 period moving average line, 3) make sure that there are no scheduled news announcements that would impact the trade, 4) I will check to ensure that I do not have any open positions that are positively correlated with this new trade.

So you see, a trade checklist can help keep your thought process in check, and help you to become more efficient in your entire execution process, leading to better trade consistency.

Execute All Trades, Even The Hard Ones

Once you have a trading plan and trade execution checklist in place, then the real hard work actually begins. That is to say, you must learn to execute the trades based on your outlined rules with as little hesitancy and emotion as possible.

This is because if you begin to cherry pick the trades that you will take and those that you will bypass, you will inevitably miss out on some potential winners. More importantly, by haphazardly taking only a percentage of those set ups that were required based on your trading rules and trading plan, you are in effect creating inconsistency in your trading program.

And by creating such inconsistency, you will not be able to effectively track the performance of your overall trading strategy. As such, it’s imperative that you take all the set ups called for by your trading strategy.

We all know that certain trades are much easier to execute compared to others. But, as many successful traders have learned, you can never know which of your set ups will ultimately work out and which ones won’t. As such, you have to be almost religious in your adherence to following your trading plan and executing on all your trade setups, even the ones you find difficult to pull the trigger on.

Post All Details Of Your Trades In A Journal

If there’s one step in the entire trading process that more traders bypass than just about everything else, it would be the task of journaling trades on a regular basis. It’s often said that what gets measured gets improved.

This is certainly true as it relates to trading in the financial markets. If you do not take the time to post the details of each and every one of your trades, along with your thought process during the trade, you will not have the benefit of being able to improve your results over time.

By studying all the data around your trades, and your state of mind during the execution process, you can help isolate those problem areas that you need to work on and refine. At the same time you will begin to understand where your strengths are in the trading process and how you might enhance those qualities as well.

Creating a trading journal does not have to be a complicated task. Sure there are trading journal software programs out there that you can utilize to get more in-depth metrics, however, you do not necessarily need to start with these advanced tools. You can simply jot down your trade details and thought process on a piece of paper or Word document, and work from that. Eventually you will want to become more organized in your trade journaling task, but, more importantly than anything else you have to believe in it and get started doing it right away.

consistent-routineBuild A Daily Routine Around Your Trading

One of the best things that you can do for achieving trading consistency is to build a daily routine that becomes second nature to you. There is something inherently valuable in repeating positive habits on a daily basis. And this is not just a matter of opinion, it is a well-documented fact that has been suggested by many psychologists and behavioral researchers.

The mere act of performing a task on a regular basis can have a positive effect on our mental state of mind. Once we build a daily routine around our trading, we become more comfortable in the overall process, and as such it puts us in a more relaxed state of mind, which will inevitably enhance our decision-making processes in the market.

An example of a daily routine could involve the following – Get up at 7 am in the morning. Shower, shave, and eat breakfast by 8 o’clock. Complete a 15 minute meditation session between 8:15 and 8:30. Get to my trading station by 8:45. Check the overnight market activity and plot all relevant support and resistance levels by 9:15. Watch the New York Stock Exchange market open at 9:30. Scan all stocks within my watchlist at 10 am and determine those that display the highest bullish momentum. Between 10 am and 11 am, look for a potential pullback to enter into one or several of these trades.

Know That Win Rate Is Only Half The Equation

To achieve profits in the market, you must have a consistent trading strategy. Now, a consistent trading method does not mean that every trade will be a winner. In fact, many profitable trading strategies have win rates that are less than 50%. This is something that seems a bit confusing for some novice traders. These traders often believe that the only way to make money in the markets is by having a high win rate strategy. One that results in more winning trades than losing trades.

But these traders fail to realize that win rate is just one aspect of the profitability equation. The other component which is often overlooked is the reward to risk profile. More specifically, the higher the reward to risk on a trade, the lower your win rate can be to achieve profitability. And vice versa the lower the reward to risk on a trade, the higher your win rate must be. This is an important distinction, and one, that all traders should be aware of.

Depending on your own psychological makeup, you may prefer a trading strategy that offers a higher win rate, but lower average win to average loss ratio. On the other hand, you might be drawn to a strategy that offers a lower win rate, but has a higher average win to average loss ratio. You must decide which characteristic is more attractive to you and implement it accordingly within your trading program.

Realize That Your Primary Job Is To Contain Risk

It’s important to realize that there is very little that we can control in the markets. What we can control is how we react to market events, and how much risk we allocate on any given trade. And so, even with a trading strategy that has a substantial edge, we can still suffer from Black Swan related events that can permanently damage our trading account. As such, as a trader we must come to realize that our primary role in the market is that of a risk manager.

Unfortunately, most traders are too focused on making profits in the market to ever take seriously the topic of risk management. It’s only when a catastrophic market event occurs, one which leads to a partial or complete blowup of the account, that traders begin to really appreciate the importance of minimizing risk in the market.

Risk in the financial markets comes in many different forms. Risk can be seen from the perspective of account security risk, market event risk, trade execution risk, computer hardware or software risk, and weekend gap risk to name just a few.

Traders should make a list of all the different types of risk components related to trading in the markets, and try to address each and every one. Doing so will ensure that you are better prepared for unexpected events that can potentially destroy a trading account.

Be Ready To Adapt To Changing Market Conditions

The best strategy for consistent profit in the Forex, futures, or equities market will change based on the current market environment. As such, in order to achieve optimal results, you should employ different strategies for different market conditions.

For example, when the markets are displaying directional price movement, then it would be better to employ a trend following approach. Conversely, when the markets are displaying range bound price behavior, then it would make more sense to incorporate a mean reversion approach within that market context.

And so, there is no one best strategy that will be suitable for all market environments. Traders need to be able to gauge the existing market environment, and align their trading methodology with these current conditions.

We cannot force our will on the market. That is to say if the markets are trading sideways, we cannot force the market to enter into a trend phase. However, what we can do is to recognize the current environment and adapt by going to our playbook and finding a compatible strategy that is in tune with the market at that particular time.

This is something that some traders have difficulty in in doing, primarily because they either consider themselves trend traders, countertrend traders, or have some other notion as it relates to their trading style. The best traders however recognize that these are just labels and instead focus their energies on aligning with what the market is doing in the moment. Thus, they are able to extract maximum profits from their trading activities.

Final Thoughts

The most consistent market strategy for you will be the one that best fits your personality. It is only when you have complete confidence in your trading strategy that you will be able to live through the inevitable drawdowns that come with trading any method. And so, first and foremost, you should take the time for self-evaluation so that can recognize your strengths and weaknesses, which will then help you in selecting the right type of trading style that’s personalized to you.

And remember, that your journey to becoming a consistently profitable trader has no final destination. That is to say that there will always be room for improvement when it comes to market speculation. No one in this business is perfect, and no one ever will be. The best that we as traders can hope for is to continually refine and adapt so that we can stay ahead of the curve and maintain a level of trading consistency that translates to profits in our brokerage account.

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