I was recently a guest lecturer at Stony Brook University sharing my knowledge of trading and trader development with interested students. At the end of my lecture, a student approached and asked,
“How can I improve my trading consistency?”
We have polled our trading community for the top trading issues they would like to solve, and trading consistency consistently makes the list.
Many have some success in trading, trades where they really get it. Trades where they really have edge. And then they also have periods of frustration and losses. If they could just keep the good trades and rid the bad ones.
At the professional level, this is what we work on here. How do we make more of our good trades and trade them bigger, and mitigate our losing trades.
Here are some ideas for improving your trading consistency:
1. Bring a consistent you to markets
One of our more talented developing traders works daily with me on focusing on just this goal. Create habits where your energy, processing ability, focus, preparation, anxiousness, physical fitness, blood sugar levels, and fatigue are unvarying. Markets are volatile. Information changes. Data moves quickly into and out of markets that require fast and accurate judgement. If the you you are bringing to the markets is not constant, then a different you is processing that different information. That combination heightens inconsistency. Bring a similar you to each trading session to reduce volatility in your trading results.
2. Build a PlayBook
In my second book, The PlayBook, I outlined a training exercise to improve your trading that we employ training our traders. What are the specific variables of trades that work best for you? Archive those setups and then study, study, study them. Trade them more often and bigger. This is your business. When you know your business, then and only then can you run it more consistently. Our biggest trader presently, outperformed all his classmates in archiving PlayBook trades when he was a Junior Trader.
3. Consistently and with a process increase your size
Sizing properly is essential for consistent trading. Some get too big too quickly, which causes inconsistency and even setback. Generally, I advise traders to bump risk and size 2o percent after each substantial period of success. One our top two traders, has become a seven-figure trader by doing little more than trading his edge consistently and with a process bigger, from when he was a six-figure trader.
4. Create a report card for your process
Our most improved trader and already a consistently profitable trader, recognized gains when he built his trading day around completing a self-determined daily process. The best traders work on themselves as much or more than they do on their trading. What are the things you need to do, and more importantly realistically will do, each day to improve? Grade your day on how well you completed your process, created to improve daily. A positive additive will be the lowering of trading stress throughout the day, as your focus is on process.
5. Be open-minded and flexible
Thesis is fine (ex. NFLX is going to trade higher) and helpful to many traders. But be open-minded to the data suggesting your trade is wrong. Be open-minded to allowing the markets to show you great risk/reward setups. Our top traders, who trade with size, work actively and intentionally on maintaining open-mindedness throughout the trading session. Some review their trading session’s performance with a focus on how open-minded they remained. Fighting price action apposite to your thesis can breed inconsistent trading.
6. Be bionic
Spend time each day tweaking and building filters for your best setups. Let technology allow you to play more offense with your favorite plays. One of our top traders recently added custom filters, which contributed an additional 50k in PnL over a 3 month period. Technology, built smartly, can ensure you do not miss your favorite setups, which would cause inconsistency of result.
7. Adapt to different markets
Markets change and traders must to them. I trade much differently than I did when I began in the late 90s. We train our traders differently today than we did when we began SMB in 2005. In this trading period of historically low volatility and a market that continually grinds higher, you must trade the setups that are rewarded. For example, pullback trades work wonderfully in this market and would have gotten creamed in 2008 and late 2007. More recently volatility spiked in our markets, with fear over the French elections, the failure to pass a health care bill, North Korea, Syria that materially affect our short-term trading.
*no relevant positions