Lessons from the Pros


The Effects of Inconsistency

This week I’ve been enjoying teaching the three Market Timing Class days; walking a new group of prospective students through the halls of Online Trading Academy. This has been an especially influential class due to the fact that at the same time we were running the Professional Options Traders class in the room next door. I like this, especially because it gives the new students an opportunity to meet the people who have already had the experience of our curriculum and are well underway on their learning journey.

Free WorkshopI have always found that the opportunity to meet with somebody who is already on the path and truly understands the impact of real financial education in meeting their short-term income and long-term wealth goals is one of the most powerful things to help a new prospective student in making such a life changing decision about their financial education. On the other side of this, it also gives me an opportunity to reconnect with students who I’ve taught on previous classes; and I enjoy nothing more than hearing updates about how they are progressing with their trading plans as they get closer to meeting their financial outcomes.

However, I don’t always hear the things that I want to hear. This is the reality of education because, let’s face it, you can put someone through an education program but that person then has to follow through and stick to a plan afterwards. It is essential that they do the things they were taught to do, so as to actually achieve the success that they were hoping for in the first place. With this in mind, I met up with two students who I have worked with in the past and we managed to sit down during lunchtime for a catch up on their trading progress. While both are into their respective training programs, they told me that they were not experiencing the levels of consistency that they were hoping for after the classes. As I always like to help in any way I can, we sat down to assess where attention was needed and in what areas. After a little time it soon became incredibly clear that the problem was not necessarily with the analysis itself, but rather with the consistency, or should I say the lack of consistency, in their execution.

I always say to my students that, “risk management, a trade plan and overall consistency are, without a doubt, the most fundamental dynamics to understand in trading. If we have rules we remove emotion, if we manage risk we preserve capital, and when we are consistent we allow ourselves to not only discover what works in our strategy, but we also find out what does not.” Most solid trade plans can work, but only if they are followed to a tee. The irony is, however, that the only way to be consistent is by being consistent! We must do the same thing over and over again repeatedly because this allows us to capture the profits when the strategy works. If we do not take each and every trade which is presented to us, we face the prospect of missing out on a trading opportunity which may have worked and we were not part of it. How many times have you passed on a trade only to watch it work out in your favor? Then, the next time you get into a position it stops out! Sometimes it feels like the trades you take are always destined to not work and the ones you didn’t take, do work. Well, here’s a nugget of advice: more of your trades are likely to be winning ones, but only if you actually take them. As the great hockey player Wayne Gretzky once said, “You always miss 100% of the shots you don’t take.” Why should trading be any different?

As we looked in the trading results of the students a little further, it became apparent that the lack of consistency was the real problem from the very start. I asked them why they didn’t take each trade which matched their plan and, more often than not, it was due to the fact that they had lost a few trades in the lead up and were fearful of another loss, thus making them fail to pull the trigger on the next trade set-up (typically with this being the one that worked). The other predominant issue stemmed when they started to “tweak” their plan by making small changes to their execution and trade management rules, once again resulting in a lack of consistency as the plan was never the same, so each trade was taken for different reasons. How can we ever hope to figure out a reliable plan if we don’t actually do the same things to track it?

We left the conversation with us all feeling more satisfied that the issue had been recognized and the solution was simple. This common problem amongst struggling traders is often overlooked. Many do not even realize that their lack of consistency in execution is the cause of their inconsistent results. In two weeks I would like to revisit this topic in more detail with chart examples and further analysis. I hope this has been of help so far.

Until next time, take care,

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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