Something all traders have in common is our goal of growth. More specifically, we all want a positive and smooth growth curve, i.e. consistent growth. So how can we best pursue consistent growth?
The pursuit of this growth is often erratic. Many traders who chase after growth end up frequently changing their trading and risk management. In other words, they trade inconsistently. Inconsistency is not likely to yield consistency. In order to achieve consistency, we must trade with consistency.
Develop and stick to your trading model.
This will encompass your trading strategy, what pairs you trade, how you manage your trades, etc. Don’t chase the market or switch styles of trading on a whim. It’s important to adapt to the market as necessary when different conditions present themselves, but do it within your trading model. A good trading model not only takes advantage of certain market conditions, but it identifies different market conditions and has a plan for each. As much as possible, trade consistently. If any changes are to be made, be sure to perform adequate research and testing before implementing them.
Develop and stick to your risk management model.
It’s critical that your risk management model is not too aggressive. If it is, then your profit and loss is likely to swing greatly over time as it goes through winning periods and losing periods. A rough losing period may do significant damage to your account as well. Not only that, but the large losses may force you to change your risk management to make it more conservative. While that is a good decision, it creates further inconsistency. Many traders might relate to a situation where you start off risking a significant amount on a new trading strategy, but you suffer losses. After that, you lower your risk to avoid more significant losses, but you have a winning period during that time. However, due to lowering your risk, your profit was not too significant and didn’t make up the previous losses. Situations like that can be very frustrating, but they are avoidable. The solution is to not be too aggressive in the first place. Use a more balanced or conservative approach in order to prepare for any losses. This way you will be more likely to sustain them with a risk management model that can remain consistent.
When it comes time to analyze your trading in order to improve, consistent trading and risk management will greatly aid in the analysis. This will help you to find what is working well and what isn’t, and thus find solutions to improve. However, attempting to analyze erratic or inconsistent trading and risk management may be difficult or impossible. It will be much more difficult to tell what exactly is working and what isn’t. For example, if EUR/USD trades are losing, but your risk happened to be heavier on losing trades, then should the trading of that pair be changed or do you just need to even out your risk? It’s unclear. However, if EUR/USD trades are losing with consistent risk management, then you will know that type of trading hasn’t been working and you can either eliminate it or research new ideas.
Growth cannot be guaranteed and greatly depends on one’s ability to forecast. Consistency cannot be guaranteed either, but it greatly depends on the variation of one’s actions. If we plan and prepare our trading model and risk management model to be consistent, then we can increase the likelihood of consistency in our results.
