5 Ways to Improve Consistency in Trading

improving consistency trading tips Dec 11, 2023

Do you know why only a select few traders seem to consistently hit it big, while so many of us struggle just to stay afloat? šŸ¤”

That's because the emotional and mental pressure during trading is immense and causes most traders to break their rules and make impulse-based decisions.

But what if I told you that the secret to breaking out of that cycle of losses and frustration is actually within your grasp? And just small adjustments to your trading routine can help you release that pressure and help you follow your trading plan.

In this article, you will find 5 Simple Practices that improve your consistency in trading right away!



1. DITCH THE CLUTTER

Imagine your garage filled with clutter – you won't find the screws you need in that chaos. Similarly, in trading, if your chart is loaded with too many indicators and lines, you might struggle to gain a clear view of price action. This clutter can be a common pitfall, especially for traders starting their journey. I often come across traders who decorate their charts with various indicators, resembling a festive Christmas tree. Colorful moving averages, VWAP, Bollinger Bands, multiple indicators at the bottom, and perhaps a volume profile on the side - it can be tempting to use them all.

Amidst all the decorations, you might lose sight of the crucial price action unfolding right in front of you. Price action is the most up-to-date information available, as it happens in real time. So, if you rely on your chart and not the tape to make trading decisions, it's crucial to maintain a clean, uncluttered chart.

Here are some actionable steps to achieve this:

  • Remove any indicators that you don't fully understand or use regularly.
  • Discard old drawings and support lines from previous weeks that are no longer relevant.
  • Get rid of obsolete price alerts that are never triggered.


I encourage you to take a challenge: clean your charts from all lines and indicators for just a day, and observe how this impacts your market experience. Does it make you feel overwhelmed or bring more clarity to your trading process? The results might surprise you.

Remember, if you don't use it, lose it. Simplify your charts, focus on price action, and watch the action unfold!

 


2. LESS IS MORE

Our brains have a fascinating limitation – they can only handle about four separate stimuli at a time. Once this threshold is crossed, the quality and efficiency of our mental efforts decline. This is especially pertinent when it comes to tasks that demand cognitive effort, just like trading. In the realm of trading, our brains struggle to multitask effectively; they can only focus on one thing at a time.

Now, let's apply this principle to trading: Entering a trade is relatively straightforward – you hit the button and you're in. However, the real challenge arises when you're in the trade. Even if you have a well-thought-out plan, your mind can play tricks on you. It may dredge up past mistakes or dwell on future possibilities, distracting you from your current decisions.

To succeed in trading, it's crucial to manage these mental distractions and stick to your plan regardless of external factors. Create conditions that allow you to be most effective during a trade, eliminating possible distractions.

For some of you, this may mean refraining from taking more than one trade at a time, especially if you're in the early stages of your trading journey. This singular focus enables you to manage your trades effectively and stay vigilant against the distractions and suggestions your mind may throw your way.

If you've found yourself exiting trades prematurely or too late, thereby sacrificing gains regularly, I encourage you to pick just two or three securities and trade them exclusively for a day. Concentrate on understanding their behavior and key levels, but don't engage in more than one trade simultaneously. Observe how this shift impacts your trading experience – you might discover newfound calmness, enhanced focus, and increased confidence in your trading process.

 


3. ONE-DAY STAND

Trading is a lot like a one-day stand – if you struggle to make a consistent profit, don’t hold positions overnight, especially the ones that are in red!

Listen, there are days when things may not go as planned. Maybe you weren't adequately prepared, or perhaps your emotions got the better of you. It's even possible that a trade just didn't work out; after all, they don't always do. That's the unpredictable nature of trading.

When your performance falls short for one reason or another, it's essential to follow these steps:

  • Review Your Trades: Take the time to assess what went wrong and what lessons can be learned from your experiences.
  • Learn and Move On: Acknowledge that losses and setbacks happen. Embrace them as opportunities for growth, and then move on.
  • Tomorrow is a New Day: Each trading day is a fresh start. It's crucial to begin with a clean slate. Don't dwell on yesterday's mistakes; they no longer matter today.

EXAMPLE: If you intended a trade as a day trade but failed to exit when it hit your stop level, and now the market is about to close with you in a losing position, my advice is clear: don't hold it overnight. This practice will help you avoid unexpected drawdowns. From my experience, most trades that were losers one day tend to become even bigger losers the next day. Unless there are clear indications that your one-night stand might become something more, resist the urge to hold on to it. Lose the loser before you become one.

Remember, there's always tomorrow to trade. If the setup presents itself again, you'll have a fresh opportunity to trade it. Starting a new day with a hangover from yesterday's losses is never a good idea.

EXTRA TIP: Avoid bringing the baggage of yesterday's trades into today's actions. Just as you wouldn't invite a one-day stand to stay over for breakfast, don't hold on to losing trades overnight.

If you often struggle with exiting losing trades, consider working with hard stops. When the price approaches your stop level, distract yourself with other activities to prevent removing the stop. Think of your stop orders as your protection in the world of trading.



4. SAFETY FIRST

Warren Buffett once wisely said, "Never test the depth of the river with both of your feet."

In trading, this principle translates to safeguarding your capital at all times, no matter the circumstances!

I've heard countless traders blaming their losses on momentary distractions, like a quick restroom break or a phone call. While these distractions might seem like legitimate reasons, the reality in trading is that excuses don't matter. Nobody cares about your excuses, and using them to justify your mistakes will only lead to repeating those mistakes.

Your excuses come at a cost, and that cost is your hard-earned money. As I mentioned in a previous video, learning from your mistakes is the fast track to consistent profits. So, prioritize safety and protect your capital.

Here's how you can do that:

  • Always Have a Stop Order: Regardless of the situation, always ensure you have stop orders in place, even if you step away for just a minute. In the world of trading, one minute can make a world of difference. It's not uncommon to lose a significant portion of your invested capital in that short period. Don't risk losing your month's worth of trading gains or more due to a momentary distraction.
  • Stay Cautious During Breaks: Next time you're about to take a coffee break or step away from your trading desk, think twice about your open positions. Many traders have suffered substantial losses during restroom breaks or similar interruptions.

And remember, if you find that you're losing more money than you're making, it's often not your trading strategy that's to blame. Instead, revisit your risk management processes and understand what's preventing you from cutting your losses short. 

 


5. HALFTIME

Trading can be mentally and physically demanding. It's essential to take breaks throughout the trading day to recharge and refocus. Instead of spending every minute in front of your screens, give yourself a halftime break.

During this break, engage in activities that help you relax and clear your mind. Have a wholesome lunch, take a refreshing walk, or connect with a friend. Giving your eyes and mind some rest allows you to return to your trading desk with a fresh perspective. Believe it or not, even a 10-minute break can significantly alter how you perceive the market. You might spot new opportunities or identify potential risks that you may have missed without the break!

 

6. TUNE OUT THE NOISE

Don’t trade based on stock tips from social media like Twitter, Instagram, or Facebook. You have to understand that all broadcast news, no matter how impactful it may seem, is often already reflected in... to continue reading download the full guide.


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