Are you finding that your trading results are not as consistent as you’d like? Are you wanting to more reliably repeat when you hit winners? Of course!
The first goal in trading is profits.
The second is then consistent profits.
Third is steadily increasing profits.
Your trading profits are primarily the result what you do, more so than what the markets do. There are traders making money every single day, so blaming the markets is just an excuse. If you want consistent profits, then get more consistent in what you do in your trading. First thing to understand is that trading is a process, and one that is preferrably systemized as the most basic step in bringing consistency to your trading.
When it comes to making improvements in a process, and particularly when your goal is greater consistency, here are three simple steps you can take to have the biggest impact.
Step 1. Define and Document your system.
One of the biggest mistakes that many traders make, especially when it comes to consistency is that they don’t have their system well-defined and written down.
When you don’t have a procedure for an activity or process documented, it is likely that there will be inconsistencies in how things are done. That is why the military is so big on procedures: they want things to be done in a uniform, reliable and predictable manner. The same thing goes for your trading.
Step 2. Measure your system’s critical aspects.
A wise man once said that in order to improve anything, you must first measure it. How else are you to know if you’re making progress? With trading you have several measurable aspects that make the bottom line what it is, in addition to the all-important profit/loss number at the end of the month.
Businesses in all industries have certain aspects that directly affect the profitability of the business. Smart managers know to monitor those aspects and assign measurables to them. The reason that these are so important is because there are several factors that make your bottom line what it is, and by measuring each of them, you can then see specifically where your opportunities for improving your system are.
Step 3. Make improvements in a controlled manner.
Once you have a detailed analysis of your system, you can now focus on specific facets of your system to make improvements. By having a method for this analysis, you can make changes to the system and test them – without risking money – either through backtesting or in a demo account and see if the change improves or hurts the system’s performance – in the specific area you seek.
For example, say you analyze your system and find that your winning percentage is currently 48%, and you’ve got an idea on how to improve it to 55%, which you “think” would increase your overall returns. You then run the analysis on the system with the change on real market data.
By looking at the results, you can see if this change accomplished it objective, but also if there were trade-offs in other aspects of your system performance, such as a lower profit-to-loss ratio or perhaps a reduced number of trading opportunities. You then can make a calculated and educated decision on whether you should incorporate the change or not.
Conclusion / Summary
Trading is a process from which you wish to have consistent – and reliable – results. Trading your system is an activity that you repeat on a regular basis, so if you want consistent results, focus on making what you do consistent.
Step 1 is to make sure that your system is defined and documented. By clarifying your system and then writing it down, you are more likely to repeat what you do consistently.
Step 2 is to measure your trading for a baseline of where you are now versus where you want to be. This also gives you insight into your opportunities for improvement.
Step 3 is to track your metrics and make improvements in a controlled manner and without risking money un-necessarily.
There are a handful of metrics in your trading business that have substantial impact on your bottom line. By measuring your system’s performance and paying particular attention to these measurables, you give yourself the quickest way to increase your profits and the biggest boost to your ability to consistently produce profits.
Are you wanting to realize greater consistency in your trading? Get a free backtesting guide and an audio on trading system analysis as free bonuses with the Trading Performance Analyzer.
It’s the user-friendly and printer-friendly tool to analyze your trading, get your critical metrics, and track your progress to realize greater profits and consistency.
Go here ==> http://insideouttrading.com/tpa/
Cheers
Brian
P.S. You can also get a powerful report that expands on how to further improve the consistency and reliability of your trading when you get the Trading Performance Analyzer. If profits and consistency are your goals, now is the time to act.