Win the Fight Against Inconsistency

12/21/2011 7:00 am EST

Focus: STRATEGIES

Jeff White

Founder, TheStockBandit.com

Jeff White of TheStockBandit.com and a speaker at the New York Traders Expo explains the series of events and realizations that helped him get “over the hump” and achieve consistency in trading.

I heard from a trader over the weekend who has gone through a number of changes in recent months, both personally and in their trading. The result was a big lack of trading consistency.

This particular trader has endured a stretch of personal changes, including relationship stress, family changes, financial pressures tied to it, and a move. That’s a lot to take!

In terms of their trading, they went from being a retail trader to a prop trader and found some distinct, challenging differences which adversely impacted their results (and trading process). It wasn’t that prop versus retail was the issue, but rather this particular trader’s surprise and perhaps their lack of understanding of what those differences would be from the front end.

For example, this particular trader did not realize they would not be allowed to hold overnight at their firm. They got caught up in the ECN rebate game and started focusing on minimizing transaction costs rather than getting into and out of trades in a timely fashion. 

Additionally, there were several other issues they hadn’t fixated on previously (like platform fees), and these changes added considerable pressure to trading.

It left them asking me how to boost consistency in trading? They asked me specifically, “What got you over the hump to consistent profits in your trading?”

Here was my response:

“Sounds like you have been through a ton, and I’m sure you’re drained emotionally as a result. Once the dust settles for you though, your self-honesty will serve you quite well as you get back on a track that’s right for you.

In terms of what I did to achieve consistency, I had been making money part time before going full time. When I made the switch from part time to full time, there was a period of about two months in between where I was assisting another experienced, full-time trader by placing orders for him and helping manage his account.

This was due to a very different style of trading (managing many positions simultaneously), and it was new software, so I needed to get accustomed to it. Once I was comfortable with it, I went live, and from my first day, I was profitable.

A year or two later, I went through a tough stretch and got really frustrated. The way I responded actually led to my longest streak of consecutive profitable months, and it was all due to one single commitment: limiting losses.

NEXT: More Valuable Lessons in Consistency

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By taking little paper cuts, I got out of bad trades with minor damage but kept finding winners along the way, too (it’s a numbers game), and that just created a ton of consistency for me.

I think if you can simplify the effects of what’s taking place with you personally, then your trading will be calmer as well. Life goes on, and periodically, it gets hectic in a way that’s not under our control, but if you detect that then, just become more passive with your trading.

When personal things are clear and you’re more focused on the market, you can get more aggressive. Becoming consistently profitable goes hand-in-hand with taking a long-haul approach for consistency over time.

It’s been said that good trading is a marathon, not a sprint. I’ve said it too, because I agree.  Overnight riches come to very few, but the truly successful usually earn it over time.

Think about it: it takes some time to learn this game; to get comfortable; to evolve to where you’re agile enough and have the discernment to switch styles or approaches when the situation calls for it.  A newbie only does that out of desperation. In this game, experience pays.

Truth be told, (it) has been a tough month for me. I’ve been whipped out of some trades, bought some highs, and sold some lows. Naturally, it has elevated my frustration level. 

The good news is that I’ve been here before. I’ve had those months where I have struggled, and every time I’ve been able to battle back, thankfully. This time should be no different.

I’ve looked over some trading results today, and it was a good exercise. I was reminded that there are occasional stretches where I give some back to the market. But they’re just little phases, and they’re inevitably followed by good runs—so long as I keep after it. 

I don’t have to make huge bets and get it all back in one trade, and I also don’t have to force trades in order to see my account back at highs. I simply need to keep a level head and persist.

Ask any distance runner and they’ll tell you it’s all about maintaining a steady pace. The hills hurt—like losing trades—but you maintain your tempo and push through it.

Cadence is important to cyclists, so they shift gears along the way in order to maintain that rhythm.

Similarly, you and I size up when we’re in the groove, just a runner takes longer strides going downhill or a cyclist shifts to high gear. When the road gets rougher or tougher on us, we scale back our size but we keep taking one good trade…that’s our job.

Trading at times feels like a fun run: achievement comes easy and you get the t-shirt as a bonus! Other times, it feels like an ultra-marathon for which you aren’t prepared. Fortunately, we have the chance to rest along the way and improve as we go. Attitude is key; as is taking a long-haul approach with our career as traders—even if we love short-term charts!

Trade for the short term but think for the long term. That’s the most direct route to consistent profits as a trader.”

See related: How to Achieve Consistency Faster

By Jeff White of The Stock Bandit

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