The Importance of Consistency

Beginner Questions Trading Psychology
1

Consistency

This image is a great opportunity to discuss consistency in trading, and I wanted to use a mistake I made to highlight why sticking to a strategy is important. I use a very simple strategy that has an opportunity around once per day, usually has decent gains and the opportunity to move my SL to break-even quite quickly. So what went wrong?

During some research into one of the indicators I was using I came across a similar strategy to mine and decided it wouldn’t be hard to implement and could lead to more opportunities in a day, shouldn’t be a problem right? Wrong.

I made a huge 5% loss in one day, despite my trading plan allowing for a MAX daily loss of 2% I decided since this was new I needed to let it do its thing, I kept losing and kept persisting, my last trade was a revenge trade and that was what stopped me because it began to affect the psychological strength I’ve worked to build over the last year.

Immediately after I went back to the plan, and despite it being a little up and down, it has now continued in its slow consistent rise.

If I had stuck to the plan, I would have been up 7.5% in the space of 3 weeks, instead of 2%. If I had stuck to the plan, I wouldn’t have missed a great trade on the day I was testing this strategy.

There is a bright side, however.

Now I know my strategy works and is consistent, I am more confident in it than I was before. Now I have burnt my hand, I won’t make the same mistake twice. Now I have made such a large and sudden loss, I know how far I can fall.

Be humble to the markets, and stick to your strategies. Even if only 50% of your trade succeed, you can be protected by your risk management and will steadily make profits.

In anticipation of some questions, I’ve pre-answered some below.

Why didn’t you use a practice account?
I’m live trading a training account with a company that mentors students towards working with a prop account, so it was to my benefit to live trade this strategy after some backtesting so that my mentor could review it. In hindsight though, this was the wrong way to go.

Why did you keep trading to such a big loss?
Honestly, the answer lies somewhere between confidence and ignorance, my strategy works and this one wasn’t too different, but this small change made a huge difference to the outcome.

Are you scalping?
No, I use small timeframes (1m,2m,5m) in my strategy as it requires precision, but I’m looking at the bigger picture all the time. Some trade last a few seconds occasionally (usually the losers!), but the average trade goes on for longer and requires consistent trade management. I would say this strategy falls under intraday.

If anyone else has any questions, or wants to discuss the finer points then feel free to leave a comment. Just to be clear I’m not looking for advice as I know my mistakes and have rectified them, I put this up for newer traders to learn from my mistake and to act as a cautionary tale.

2

ICT talks about a risk management method to keep your equity curve smooth with no large spikes.

Lets say for example you risk 1% per trade. You trade as normal until you take a loss, once you take the loss you half your risk to 0.5% then trade until you make back the original loss, then you can return to 1% risk as normal.

Also, if you get 5 wins in a row, you would also then cut down your risk by half (0.5%) for a couple of trades just to anticipate an upcoming loss, after this is done you can then return to 1%…

As long as the strategy is consistent then this method should help avoid massive down spikes in your equity curve, resulting in smoother growth.

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3

That’s quite an interesting approach actually, I can get how that works. I imagine it helps with the psychological aspect of retaining composite under the pressure of repeated losses?

4

Yeah mate, im sure he talks about it in the Sniper Scout series if you want to have a look. Cant remember which video though… might be number 3 or 4. If its not Scout Sniper then it must be the WENT series.

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5

Good shout, will give that a look this week :+1:t2: thanks for the recommendation

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6

I really like the sound of that.

7

Of course. By constant profit I mean the percentage of profit will be higher with the loss/profit combined. And consistent profit helps the trader to succeed.

8

Consistency is important in any sphere of life. As John Maxwell said, “Small disciplines repeated with consistency lead to great achievements gained slowly over time.”

9

Risk control is essential to make a consistent profit. If I trade 5 and trade 1: 2 risk ratio in each trade, the loss percentage will be less than the profit. And it is possible to make a consistent profit by trading in this way.