In This Episode
- How consistency could be a trap
- Walter's risk calculator
- Why learning to tie your shoelaces is important in championship basketball
How do I Become More Consistent?
Many traders ask us how to become a more consistent trader. We understand where the question comes from, but the answer is much more complex than most traders think.
In this episode, we talk about how to review your results and figure out if you should actually work towards becoming more consistent. You might already be consistently profitable, your results could just be a matter of perspective.
Listen in to find out more.
Listen to the Audio Version
Click the play button below to hear the audio-only version. You can also download the mp3 file below.
Podcast: Play in new window | Download
Read the Transcript:
Walter: Hi, Hugh. We have a question from a trader and this trader is wondering, “I am working on becoming more consistently profitable and I am putting all of my time into this. How do I become more consistent?”
So my thoughts are: if this is what you are looking at, I am going to read between the lines here and say that this could be — well, it's hard to say — this could be a break even trader or it could be a trader that is actually making money.
So one thing that I would say is you probably need to widen your scope. When people say, “I want to be more consistent.” Usually it could mean that like, “Monday, I make money. Tuesday, I lose money. Wednesday and Thursday, I make money and then Friday, I lose a lot”. That sort of thing where it is kind of in and out.
My thoughts on that are, you probably want to set up your goals. So that you are looking at more of a wider scope. So instead of looking at making money every day, if you are trading the four-hour charts, you are probably not going to make money every day.
If you are trading the five-minute charts, you are still probably not going to make money every day but maybe it is possible to have more you know many, more profitable days than not. So the idea here is that you want to put a measuring stick at the spot where it is easily achieved. But also you can probably improve on it a little bit.
For example, the goal of making money every single day with a sixty percent win rate strategy is not going to work. It is just not going to work. If that is what I am reading here in terms of like, “This is my goal to be more consistent”. It is like, “I want to cut out all my losers because if I cut off all my losers then I will be profitable” or I will be more profitable.
Really what you want to do here is get to a point where the risk that you are taking, you are okay losing that. And that the rewards that you are pulling from the markets are in terms of a weekly or a monthly goal. Rather than a daily or an hourly goal. So just stretch it out a bit further. That is what I would recommend this trader to do.
Again I am not sure if you are actually making money or not. If you are not making money like you are kind of in that break-even stage then I would look to you know we've done other podcasts about how you use risk. How do you tweak your exits? Those sorts of things but that is more down that path most likely for you if you break even.
If you are at the point where you are making money but it is just kind of not enough then it is probably going to be more along the lines of changing what your goals are. Once you change those goals you go, “Okay, I want to make a certain percentage every week or every month”, that makes it easier for you to then adjust your risk to a point where those losing periods don't hurt as much.
So you kind of need to know where you want to go. I will put the risk calculator in the show notes. You can check that out and use that to kind of fine-tune that. I think it sounds like what is happening with this trader, it is really common too by the way. Your losing streaks are so painful that you feel like you need to change something. To get to a point where you are more comfortable with your trading.
It is probably just adjusting that risk based on the parameters of your strategy. Your goals are going to be a little bit further off than they are right now. That was the best guess. What are your thoughts on that?
Hugh: Hey there! I hope you find this episode useful. I just want to let you know that Walter and I give away something valuable every month that helps traders improve their skills. You can enter to win by simply leaving an iTunes review and leaving a comment on our YouTube videos.
At the end of each month, we'll look at the comments and reviews from the month and we'll pick a winner at random. Each comment and each review counts for one entry during the month that it's pitted.
So, if you're interested in that, be sure to enter after this podcast is over. Alright, back to the episode.
Hugh: I totally agree. I think it is just a matter of either zooming out like you said. Zooming out to a weekly or monthly. Usually a monthly for most traders I think and or just you know having this expectation. There's a lot of marketing in the forex education world about scalping or whatever. You are going to make every day just by doing this one thing at five o'clock.
I think that leads to people thinking that they need to be perfect. Like they need to have a ninety-nine percent win rate or a ninety percent win rate. When in reality you don't obviously. So I think there is that perfection bias with a lot of people. If you can overcome that and just understand that even if you have a sixty percent win rate that is really good still.
You just have to either get more trades or just you know wait for the right setups or whatever it is. It is not necessarily about improving consistency. It is being comfortable with what you are trading.
Walter: Totally, you are right about the market thing. That is so true. People trying to like, there was a trader yesterday and he was contacting me about, “I need to qualify for some you know LTS” or whatever. I don't even know what that is. I said, “The forum is not for you.” I told him.
I said, “I am sorry but it is not. Because he was like, “I really need someone to help me” but it sounded like it was one of those things where you know, they have to make so much money and they cannot hold positions over the weekend. All that kind of stuff. I do not know but it is what it sounds like.
I never heard of whatever he was talking about but I just said, “Look, you know that style of trading is, it is possible.” But, for the vast majority of traders, especially new traders, trading those lower time frames and trying to make the you know like you say, the eighty percent win rate, that is going to be so frustrating for so many traders. To try and go down that path.
It is so much easier to go the other way and start at the daily’s and work your way down. It is like in sports. Where they say focus on the fundamentals you know like on volleyball or whatever. I guess they would focus on serving and digging or whatever you know and then Grid Iron they focus on tackling. In soccer, they focus on kicking or passing.
Hugh: Have you read the John Wooden book?
Walter: No but I have heard about it. It is so funny that you said that. I heard about it this week. The coach from UCLA, right?
Hugh: Yeah. I mean, he was like a national champion for ten years in a row.
Walter: Ten years in a row? Amazing.
Hugh: I read the book and he said like what you are saying. The first thing he taught all these players was how to tie their shoelaces. The kids walked in and they were like, “What the heck is this guy talking about tying shoelaces.”
He was like, “No, if your socks are not on correctly, you will be uncomfortable and you cannot play. If your shoelaces keep coming off, your mind is going to be off the ball and on your shoelaces. So you have got to learn how to do these two things first”. I think that is exactly what you are talking about.
Walter: That's awesome. Someone was just talking about that book. Actually you know, my friend in high school who is really good at — a good friend — he's excellent at basketball. He actually played basketball in college. He went to the John Wooden camp when he was a kid and he had a picture with him I am like, “Dude, that is John Wooden.” Like, “No way man. He is a legend” because he coached Kareem Abdul-jabbar.
I think those guys, they won like ten years in a row or eleven years in a row. They won the championship. It is amazing. It is so true, isn't it? When you talk to these really good coaches like in the athletics world, it is just focus on the fundamentals.
It is the same in trading. It is exactly the same in trading; focus on the fundamentals. The biggest thing you can do as a trader to get better is to have eyes on how well you're doing right now. In terms of execution which means the journal of your execution. That is the best thing and have somebody else's eyes on your execution.
If you have a strategy that works and you are not making money then either strategy stops working. The market you know changes somehow or most likely it is your execution of that really good strategy. It is so true. It just comes down to fundamentals. Entries, risk management and exits. It is all you know win rinse-wash repeat or whatever they say you know. It is just doing it over again.
Hugh: It is usually quite mundane, the things that make you successful. I have this one thing that always blows my mind. I was at the golf driving range and I was terrible. Still terrible nowadays but this one guy who was in the stall next to me. He is an older guy and I guess he was a coach.
He said “I am in pain watching you hit that ball. So I am going to help you out”. He coached me for about half an hour. He went through these very simple steps and at the end of that, I was hitting the ball like straight and you know up in the air. Instead of hitting on the ground and killing all the worms.
To this day I can still hit the ball decently better than most people. I was just amazed that you know those fundamentals in that half an hour got me to where I couldn't get to in like two years before that. So it really is about the mundane fundamentals.
Walter: It is so true, that's so true.
Hugh: Alright, cool. Thanks, Walter.
Walter: See you.
Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.
How to Get New Episodes of The Think Profit Podcast
You can get notified of new episodes of the podcast by subscribing to our email list, or subscribing via any of the major podcast platforms that can be found here.
If you enjoyed this episode, a 5-star review on your favorite podcast platform is always greatly appreciated!
Thanks for listening and we hope that your trading is going well!
