Why Consistency Plays A Big Role In Forex Trading?
If you were to inquire about a group of profitable investors/traders what the top secret behind their success is, chances are that you will listen to the word “consistency” more than once. Sadly, attaining consistency is easier said than done. But by setting trading rules and creating a process for yourself, you can attain consistency in your execution, which is the initial step to become a consistently profitable investor/trader.
Let’s take an example of John, an investor/trader with no particular set of guidelines to guide him. Not having a set of rules usually leaves John at the mercy of his emotions, which tends to lead him away from making relevant decisions. Due to lack of rules, he often finds himself wasting his energy and precious time in thinking about what he should do, instead of automatically taking the right steps. His focus is diverted from the markets because he’s too busy thinking of what to do. Because of this, he is not able to analyze market behavior. Setting rules–and more importantly, applying those rules–is essential.
By having a set of rules, we can train ourselves over time to recognize and have automatic responses to certain circumstances. By training ourselves to react automatically, we will find more consistency in our trading because we no longer need to waste a lot of time thinking. It might take experience and time to develop rules that work for our trading personality. But do you want to know a little secret? The trick in making those rules to work at a higher success rate is to “simply believe in them.”
In order to rely on your rules, you have to keep in mind the possible consequences of violating them. These can be based on your observations or past experience.
For example, you can remind the time you set your stop too tight on a range-based trade and it finished up getting stopped out before the market moved in your favor. The next time you take the same setup, you will feel the need to follow your stop-loss rule in hopes of avoiding another losing scenario.
What works for other investors/traders will not surely work for you. Since the understanding of the possible outcomes of violating those rules come from your own experience, it’d be more effective to come up with your OWN rules. Besides, it makes much more sense to come up with rules that fit YOUR personality and YOUR trading style. Now don’t assume you’ll certainly come up with a set of rules that will get you a 100% win ratio.
Remember that the future is uncertain; there are no certainties in market behavior too and this makes trading a game of probabilities. Trading is more like exercising – you should do it consistently to see results. Having a set of rules helps in forming good trading and you can frame the market to build your system and decisions in the face of that uncertainty. With experience, time and deliberate practice, these rules will lead to great trading habits, natural feel for the market, and consistent profitability.