We noticed one developing trader show a real ability to make money but also a lack of consistency and volatility in his trading. This was holding him back as a trader. We challenged him to focus on being more consistent, a Super Consistent Trader.
I wrote the promising trader a quick note…
You show a real ability to make money. That is a terrific sign of potential. We do not see this with many traders.
But you also show a lack of consistency and volatility in your trading results.
If you can think seriously and thoughtfully about how to remove the lack of consistency and volatility from your trading, you can do this. For example, ask yourself these five questions to help improve your consistency.
- What trades cause too much inconsistency and volatility?
- Does a type of trading cause this?
- Does the time of day cause this?
- Do you need guardrails on overtrading and tilt trading?
- What best practices bring consistency?
And these are easy words to write, but you must study your trading and yourself to focus on being consistent and less volatile.
The positive PNL is there on some solid trades. But how do we keep more of that?
Said another way, what can you do to be a Super Consistent Trader? (end)
The promising developing trader responded with 5 solid ideas to help him become more consistent. Those ideas are:
1. Max ticker loss of $750. If more than one attempt might be necessary, size accordingly. If adding to a trade, recalculate the risk. Ask my trading partner to help hold me accountable by calling me out if I go over.
2. If up a stop, implement a 50% Give Back Rule.
3. The goal of a green week gets a $250 risk bump until back to the original risk of $2500 while improving on consistency. Then, resume the “2 stops in 2 weeks” timeframe for accelerated, longer-term growth. Sizing remains the same until back to breakeven, then increase size 10% each week.
4. Stay move2move for the sake of consistency, and do not skew EV by taking oversized losses.
5. Risk Allocation – 30-40% in A setups, 10-20% in B setups, and anything less 5-10%.
I offered one more idea for the trader to consider in a response.
I would add one more thing….work on better entries.
Having mentored top traders, they often conclude that their best trades work right away. It is not always true that more risk means more profits. From my seat, a more effective way to make more and be more consistent is to hyper-focus on better risk/reward entries.
With your best trades, review how you could have entered better and improved your risk/reward. Review the best signal for entry. (end)
We hope you learn from this anecdote from a trader on our proprietary trading desk. I will leave with one question to consider to help you grow your trading account…
What do you need to do to become a Super Consistent Trader?
Mike Bellafiore is the Co-Founder of SMB Capital, a proprietary trading desk, and SMB Training, which provides trading education in stocks, options, and futures. Bella, @MikeBellafiore, is the author of One Good Trade and The PlayBook. He welcomes your trading questions at [email protected].