Consistency is the key to success in trading

Jan 9, 2019, 3:13 PM | Updated: 3:18 pm

SPONSORED — You’ve heard the old saying “Failure to plan is a plan for failure.” Nowhere is this truer than when you’re trading in the market. In fact, the lack of a proven trade plan — or inconsistency in following that plan — could make the difference between success and failure.

Consistency is key

“I recently read an article about a university study focusing on behavior traits of professional and amateur traders,” said Sam Evans, instructor at Online Trade Academy. “The study found that traders who stuck to a proven trade plan saw much better outcomes than those who consistently changed their plan.”

Why do traders change their plan? Likely, it’s to win more, or to avoid losing. As a human, you’re wired to essentially do two things: seek pleasure and avoid pain. As creatures of habit and with this programming in mind, trading can be a hugely challenging task — even before you begin. That’s because your DNA is basically wired against you (in regard to the market).

“This means we all have a huge task ahead of us in FX, or any other form or trading, if we hope to eventually be successful and consistent at it,” Evans said. “This is not because we are stupid or incapable; it is because of the mental challenge we face from the outset.”

The proven trading plan

Evans’ many articles tend to focus on one rule: consistency. He recommends using a detailed trading plan and a simple, rule-based strategy.

“The reason I place emphasis on the simple part is because we need to be able to take action in the market when the time is right and not hang around pondering over our choices for too long,” he said. “Too much pondering puts us in danger of overcomplicating the opportunities right in front of us and then never making a decision — or making too many decisions! The easier it is for us to spot a trading opportunity in the market, the easier it is to be able to place that trade and take action.”

Pulling the trigger

By using a simple trading plan, you’re empowered to take action when action is required. However, there is more to this than just being able to pull the trigger with ease. For many traders, pulling the trigger for an entry is not the problem at all. In fact, it is probably the opposite — they find themselves trigger-happy. To cure this ailment, the simple trading strategy again plays its vital role in that the simpler it is, the less there is to modify and change. On the flip side, you will always see that the more detailed or complicated the trading strategy, the more it can potentially change.

“Let’s assume that we now have a simple strategy in our trading toolkit which involves buying at demand and selling at supply,” Evans explained. “We are going to focus on applying this strategy without question, meaning every time a trade setup appears to us, we aim to take it. The first two trades come up and they work. A day later we come across another setup. Again, we take the trade and this time we are stopped out. Expecting this to happen from time to time we move on and await the next trade. It comes up, we take it and again we get a small loss. In fact, the next trade we take again results in a loss. We now have a total of three losing trades in a row.”

Those who are new to trading might be discouraged by this turn of events. However, according to Evans, this is when consistency is vital.

“The reality of the markets actually dictates that we could get even more losses than this — one after the other,” he said. The different permutations and outcomes are virtually endless. However, if a trading strategy has been proven to work over the long run, with a quality risk-to-reward profile, it requires adherence regardless of how the trades play out.”

Finding the right plan

The biggest challenge in the quest for ongoing trading success is the temptation to move the goal posts when things don’t work out as hoped. Consistency to a proven trade plan removes the fear and other emotions from the process, resulting in consistent success over time. Online Trading Academy provides educational courses and proven trade plans to help you succeed in the market. Visit Online Trading Academy for more information.

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Consistency is the key to success in trading