Consistent Execution Of Your Trading Plan

In the last article I talked about one of the biggest problems that I see time and time again with traders—inconsistency! And again, the most prominent areas of inconsistency are in trading approach, trade execution, and trading management.

Today I’d like to share some insights with you on trade execution. During my trading experience I’ve noticed a great tendency for traders to be very random about the execution of a particular set up that they are (supposedly) watching for. Sometimes, they are extremely aggressive and will take anything that even smells like a trade (and usually with little regard to risk controls, but that’s another issue), and other traders are just the opposite—they are the “deer in the headlights”, just frozen at the controls. Let’s look at the first group, the aggressive traders.

Aggressive traders often will have more of a “gun slinging” approach to their trading, where they just simply want action. They are the epitome of the expression, “ready, fire, aim”! This means that at times they will take trades that really aren’t set up properly according to what they were originally supposed to be looking for, and they will distort the facts to feed their own emotions. Impatience (and the need for action) intervenes, and they end up clicking into a trade that they usually regret later. Or worse yet, they get lucky a couple of times, so they get the feeling of invincibility, which is a killer.

The other group of traders are the scared “Bambi” traders, and this group will often be very good at seeing good trade set ups, but somehow just can’t pull the trigger. The market will inevitably do exactly what they thought it would do, but unfortunately, they are left on the outside looking in at what they missed. These people have been unable to overcome the fear factor, and in trading, if you don’t overcome this problem, you’re going to have a short trading career.

So what’s the answer? You! Ironically, people think that they have to learn more about the markets, other trading systems, new technical indicators etc, and this is simply not what’s going to change things for them. The consistency needed is internal, it’s in you! Successful traders trade without fear. That means they execute their trades without fear or hesitation, yet they also have a healthy respect for restraint. They are not characterized by the recklessness of the “gun slingers” that we talked about previously, nor do they get all excited and euphoric when they have a nice string of winning trades. They remain very even-keeled—and consistent.

And successful traders are also totally prepared for losses, they expect losses, and they are comfortable and accepting of losses. It’s never a problem, because they have impeccable risk controls in place at all times.

If you are having difficulties with consistent trade execution (and maybe you recognize yourself in one of the groups above), then I would highly, highly suggest that you resolve several key issues. First, make sure you have a good, sound trading approach, something that you see easily and you have confidence in. In conjunction with that, you need to have excellent risk management skills. And last, but definitely not least, you need to be psychologically totally prepared to trade. That means being able to trade without fear, and having extreme focus and discipline. You want to be able to detach yourself both mentally and financially from the outcome of any trade.

You can go to your job and have an “off” day and still get paid. But in trading, if you’re not ready for the day, it will usually cost you. Again, I would strongly suggest working on the mental part of your game. It’s what all the top athletes in the world have done, and it’s what all the top traders have done!

In the next article, we’ll talk about the third area of common inconsistency, and that is in risk control. Have you noticed that at the end of my articles I always say “keep your risk under control”? There’s a reason for it!

So until next time…keep your risk under control! And oh yes, be consistent!