My friend Joe Fahmy wrote this past week that all traders should focus on one goal – consistency. This is, of course, much easier said than done as I am certain he would also agree.
Even among the elite performers who produce average gains well in excess of +100% most years from their trading, they will also be the first to tell you that sustaining a high level of consistency, while a good objective, is unrealistic for most. At least in sustaining very high levels of performance which is what most of us so desperately seek. Not only do most us have trouble in bringing our highest level of focus and skill most of the time to the market, but no matter what methods we use there will be market conditions that will neuter even the best of strategies.
That said, consistency in what we do and what we have control over as traders and investors, is a realistic and attainable objective for everyone. If we can learn how to be much more consistent in how we manage our work every day, that will also increase the consistency in performance as much as we can.
If you desire to truly improve your consistency, here are the six things you will need to do:
Have A Consistent Daily Routine: Every day you trade (and the days you don’t) need to be set by a routine. We have a lot of work to do daily and the only way you’re going to do the work you need to get done is by having a set routine and sticking to it every single day. You could set a watch every day to what I do to trade (as you can tell by my live notebook) and doing so creates a consistent approach. To develop my routine and my daily habits, for several years I used a simple timer and a written to-do list that reminded me exactly when to do what and when. Over time, that schedule became my natural routine and I do not vary it at all unless absolutely necessary. When I can’t maintain my routine for some reason, I simply don’t trade. Period.
Adopt And Maintain A Consistent Strategy: Traders love to tweak and abandon strategies that suffer short-term performance issues. In sum, many make the mistake of placing far too much importance on short-term results rather than the longer-term performance. The way you increase your consistency is to do the same thing again and again and only tweak when necessary. While the elite performers among us will never be satisfied with our current results (after all that’s why we are elite performers) you must learn to temper your enthusiasm for improvement enough so that your approach remains consistent. If you are constantly making tweaks and changes, you won’t have any way to evaluate the changes you’re making and whether they’re are better than your prior methods. Instead, you must make changes only when necessary and only after much testing, tracking and deliberation. Over the years, I’ve been tempted to change my approach many times and by just being a little more patient, I have learned that changes I would have made would have caused more setbacks than progress. Once you have developed a strategy that works, you must be patient with it and give it time and room to work if you desire to improve your consistency.
Simply, Simply & Simplify More: Elite performers have simple strategies that consistently work without much analysis, factors, or many decision-making steps. This is something I’ve learned from others, but also have seen the importance in my own strategy development over the years. New and unsuccessful traders have a truly nasty habit of thinking that the more complicated the approach or system they use, the more effective it will become when the opposite is true. The problem with complex systems is that they can be difficult to consistently implement and maintain especially when conditions change and/or when emotions such as performance anxiety come in to play. You must look for ways to simply your approach, not make it more complex. Working harder and making your approach more complex is NEVER the correct answer.
Track What You Do Everyday: The only way to be more consistent is to first understand what you are actually doing now and that only comes by tracking everything you do. No, I’m not talking about looking at how your portfolio performed every day, but rather keeping notes on everything you do as a trader and investor. In essence, you need to track everything you do that generates a trade from start to finish for every trade you make. This again is why keeping a trading journal updated daily is so very important. When you track your trading in this way, over time you will begin to notice patterns and habits (both good and bad) and be in the best position to identify areas of weakness and exactly where you need to focus your improvement. Likewise, the more consistent and simple your approach, the easier it will be to see what you need to do to improve.
Flowchart Everything: I am a huge believer in using flowcharts to outline a trading and investment strategy. If you have never done that before, this is a absolute must-do. This basically means you write down everything you do for awhile (at least for two years) and then write flowcharts based upon your work flow activity showing in specific steps what you do, how you do it, and every step you take in the trading and investing process. If you are inconsistent, you won’t be able to flowchart anything out because the chart would have too many boxes and not in a straight-forward, systematic manner. However, if you are being consistent in your approach, flowcharting is very simple and straight forward. In reality, the best trading strategies I’ve seen and have used can be flowcharted out in about 15 minutes. If yours requires more time than that to create and/or if you if can’t chart it out because it is too complex or it changes all of the time, this is the best indication of all why you are having trouble with maintaining any level of consistency.
Set Your Rules & Follow The Rules: Once you flowchart what you do, you can then develop rules by which to trade by. In essence, the rules of your strategy. Once you have rules, if you follow those rules consistency, you will be more consistent. There’s just no way around that. Now I have to tell you, most traders are very reluctant and some even refuse to set rules for themselves to follow. This is also why they don’t achieve as much as they could. Even those who I personally mentor (which are about as highly-motivated of people you could ever meet) are very reluctant and lazy to do so. For example, I recently had to remove a trader from my mentorship group who couldn’t seem to “find the time” to write down his trading rules and explain why (among other things) after months of showing him why this was so vital to his development as he had no consistency whatsoever. In my experience, traders who don’t want to formulate rules and follow them are also those who consciously or not also want a way to blame others for their trading and investing decisions when things go wrong. Why do I say that? Well, once you have the rules in place and you don’t follow them, who can you blame but yourself for your mistakes? Unfortunately, I see this pattern in far too many traders and most never realize what they are doing to themselves. Again, the key here is to set the rules and follow those rules. At least when you break them (and you will), you can learn and improve when evaluating your trading performance over long periods of time. Without rules, however, you will struggle indefinitely and any level of consistency will be impossible.
Within these six things to do, I recommend focusing on only one at a time and it must begin by working on your routine first and foremost. If you can then later include ways to track everything you do in your trading journal, that will help you later on to flowchart everything out and then make rules for yourself based upon those same flowcharts. This in turn, will provide you a consistent, simple strategy to follow that you can stick with and improve over time.
By the way, those who have followed this advice in my mentorship group have seen significant improvements over time and quite a few are already on their way to becoming elite performers. No, none of this is easy and it takes time and hard work to do, but worth it if you take these steps to improve.
The bottom line is this – if you don’t maintain a level of consistency in what you do, you will never be able to make the progress and achieve the results you desire. This is why so many successful traders talk about the importance of consistency in approach as that has often made all the difference between their success and failure.