How to Achieve Consistency Faster

08/29/2011 3:30 pm EST

Focus: STRATEGIES

Derek Frey

Chief Market Strategist, Carnac Investment Advisors, LLC

To achieve more consistent results, traders must be consistent in their methods, including sticking to their trade plans and always using disciplined risk parameters, explains Derek Frey.

Making money as a trader is important, but being consistent as a trader is obviously very important also.  Our guest today is Derek Frey; he is going to talk about how we can get to that point of consistency more quickly. So Derek, what is the key, in your mind, to being consistent?

Well, first of all, consistency is something you do; it is not something you get, and I think that is something that a lot of traders aren’t recognizing when they get started. 

They think they are just going to all of a sudden one day fall backwards into a pile of consistency, and it doesn’t really work that way; at least it never has for me. 

What did you do along your education as a trader to get there faster?

Really just realizing that being consistent was going to be part of the key of getting me where I was trying to go.

Because to realize the statistical edge that any system gives you, you have to be consistent with it. We of course from trade to trade don’t know which one is going to work and which one is not going to work, but we know if we are consistent in executing our edge over time, over a course of 1000 trades or 10,000 trades, we make money.

You know, it is not about each individual one; it is about the whole. So, that was kind of the biggest thing for me, realizing if I was ever going to take advantage of the edge that I have with whatever method it is, you have to be consistent with it. 

Nobody gets rich in this business off of five trades; it is usually thousands of trades.

So does that mean when I have an indicator that I’m using, that I take every signal that it gives me, or what do you mean by that?

It doesn’t necessarily mean you take every signal. It just means that you have a predetermined plan, a risk matrix that you follow along consistently that gets you in and gets you out.

The method I use, the Harmonics, it spits out probably a couple hundred signals a day, and I only take maybe three to five of them, and I have a specific way of vetting them to get to those three to five, and that is what keeps me consistent is the ones I’m picking are the same in terms of the parameters. So therefore, consistency.

All right, is that also meaning being disciplined about your stop? Is that part of it as well?

Absolutely, the risk plan has to be absolutely disciplined and followed to a T without question, and that is also a huge part of consistency, if not the biggest part, is making sure that you are always taking care of your risk. 

See related: Make Sure Risk/Reward Is on Your Side

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So if somebody is just starting out and they are having some success, but they are also having failures and losing more money when they are getting started, how do they make that transition? What is the first step?

Well for me it was finding a method that fit my personality; one that just made sense, that I believed in, that I could wrap my brain around, that I could learn everything about, and really feel like I understood it back to front.

Because having that knowledge is what gives you confidence, and confidence is what allows you to act consistently. You are not going to act consistently if you are not confident, and the confidence comes from the education.

So really I think just knowing whatever method you are using from back to front is kind of the starting point to get to consistency.

So does that mean I just need to try a lot of different things to find out what is a good fit?

You do need to find something that fits your personality, something that just jives. It doesn’t necessarily mean that you have to wander around bumping into a hundred different things. 

You might find one early in the game, but whatever it takes, whether it takes three times or 300, at the end of the day, you have got to find something that will fit your personality. 

Consistency means you are going to do it thousands of times over and over again; you are never going to do something thousands of times over and over again if it is not comfortable.

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