Lessons from the Pros


Patience, Discipline and Consistency – All Rolled Into One

By the time you are reading this article, you are probably getting your affairs in order for the upcoming holiday season and looking forward to some quality time this Christmas and New Year with the family and good friends. As always at this time in the calendar, I like to unwind too and relax as best as I can with those people closest to me, fully enjoying this special time. I have also found over the years that I seem to get one or two “quiet” spots during this time to take a little look over trading and review the plan. Typically markets can get a little quieter during this period, so this is an ideal time to take that bit of time out each year for an all-round check of the trade plan and best practices. It is something I have done for years in a row now and has become somewhat of a ritual over the holidays for me!

As it stands, there is usually very little in the way of changes which need to be made as I have been using the same techniques and methods for a long time now, but this does not mean that I am still not checking any ways to become more efficient in my day to day trading endeavors either. If anything, I would say that the whole Christmas review process becomes more of reinforcing of my rules and a solid way to make sure I am sticking to the rules each and every time. Let’s face it, we can all take our eye off the ball from time to time and get stuck in complacency mode now and then if we are not careful. It was when I was looking at my journal the other day and planning which afternoon I would spend looking over my plan this holiday, when I got a thought that this would be a good topic to share with my readers.

If you have not yet taken the time to regularly review your own trade plan, I would suggest that there is really not a better time to do it than around now when you are about to head into a New Year. Start fresh with a clear mind and attitude to move forward with and check that you are doing all the things which you intended to do when you first put that all important trade plan together. To help you along the way, I would like to share with you three key areas which you should be ensuring that you are including in your trades if you are not doing so already:

1. Patience

This characteristic is vital to any trader who wishes to wait for the very best setups that the markets have to offer. Only by waiting to enter the market with the correct timing, will you ever hope to achieve the very best risk to reward ratios and probabilities for success. The market has to come to you and if it doesn’t, then let it go without you. There will always be another trade if you have the patience to wait and not chase.

2. Discipline

Next up we have discipline. Do you know the rules which you should be following but never follow? Do you stick to your risk management rules when the trade does not work out? Do you only take trades which meet the exact requirements of your trade plan? If the answer is no to one or more of the above, then you need to ask why. The market can never be controlled, so you need to have the ability to control yourself and that only comes for developing your discipline, plain and simple.

3. Consistency

Probably the area in which most traders tend to struggle the most is consistency. The main reason this is such a challenge is nothing more than the ongoing need for most of us to be right and avoid losses. You can take a winning strategy and apply it in the market successfully only if you stick to the rules of execution over and over again. The problems tend to arise when we tinker with the rules and execution after a series of small losses because we attempt to make the already working strategy better so as to stop the losses from happening. This also applies to those of us who tend to pass on a good setup which matches our plan, so as to avoid a potential loss from happening. If you don’t take a trade, though, you can never hope to achieve a winner, can you?

Let’s take a look at the a recent selection of analysis from the Forex XLT we put together late last month to show all three of these requirements in action and why they are so fundamental in our cause. Below is a screen shot of a Live Trading and Analysis session carried out on November 20th on the EURGBP:


Marked off on our example above are a total of 3 levels on this currency pair. Demand to buy in the region 0.8006, Supply to sell at 0.8090 and Supply again to sell at 0.8140. Each zone is a low risk, high potential reward trade, planned out in advance before the market reached the level. However, for the plan to work out correctly we need to first have the patience to allow prices to come to one of the entries and not jump in randomly. Next, we need to exert the discipline to allow the trade to work in our favor is it chooses to do so, even if it stops us out. Finally, we need to take each trade as it comes with consistency, allowing us to measure our results and stick to the plan. Let’s see how things panned out:

The day after the XLT session, prices dropped nicely into our Demand zone, with patience allowing the triggering of a very successful rally from the area we highlighted in advance, resulting in a solid profit as we approached the Supply at 0.8090. After the profit was taken on the trade, the short triggers at our Supply zone but stopped us out for a small loss. While it did push higher, it then dropped back down, tempting the novice to re-enter the short. Our grads pass on this and instead take the loss on the chin in a disciplined fashion and wait for the next trade to come along.

It takes a little more patience over the next few days but the higher short at Supply around 0.8140 triggers. Only the consistency of sticking to taking each trade as it comes, ensures that again we get another solid trade with a healthy risk to reward ratio in the bag, as the EURGBP drops around another 100 pips with ease. We have 2 wins totalling almost 200 pips of profit and 1 loss for around 25 pips, all for just sticking to the plan.

I am not showing you these trades to brag in any way at all, for we all get losses and wins. That is the nature of the game. Yet, it is important to understand how consistent trading is done and the key elements and skills which need to applied if you are hoping to ever see ongoing process in you speculative activities. Take the time this month to look over your plan and see where you think you can improve on your performance. It could make the world of difference in the long run. On a final note, I would like to thank you all for you continued interest in reading my articles and supporting what we do. Have a wonderful Christmas and a Happy New Year!

See you in 2013,
Sam Evans

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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