Lesson three: Building consistent trading habits

Focus on the process, not the results

Easier said than done, right? The topics discussed in this guide are all about the process of trading and having a game-plan in place which gives you the confidence to act decisively. One of hardest aspects to trading is not thinking about the outcome, both the losses and profits. It takes patience, but over time with a pointed effort you can build the discipline to only focus on the aspects of trading which lead to the results, win or lose.

One method to help with staying focused on the process, is to use a checklist prior to entering a trade.

What to include in your checklist:

• What is my logic for entering the trade, and does it fit within my trading plan?
• Where will I place my stop and target, does it allow for a good risk/reward?
• Am I willing to accept a loss on this trade, and the risk associated with it?
• Is this a trade I would take 10 out of 10 times?

You need to be able to answer yes to these questions. ‘Good’ trades can be losers while ‘bad’ trades can be winners. The success of a trade should not be solely defined by what is in the profit and loss column.

Keep a journal

Journaling is an effective way to identify what you are doing well. Writing them down will help you remember to do more of those things. A journal will also help you spot where you are not strong. Sometimes seeing something in print makes it undeniable. Doing less of what’s hurting you is a good way to become a better trader. For each trade, write down your reason for entry, your stop loss and limit, your mood when you open and close the trade and anything you noticed while the trade was open.

Consistency

Inconsistency in your process will lead to inconsistent results. If you aren’t consistent with the types of trades you take, how you enter and exit and position size, you will find your results will have a high level of variance, ultimately diminishing your confidence level.