Inconsistency, not a bad sign but a sign for sure

[Trembling Hand]

In another thread I made a comment about the causes of inconsistency being a signal that you’re not trading to "your" niche. If you are a beginner obviously you are going to be wildly inconsistent because your skill level is going to be low. In fact as many have found out recently their results have more to do with the trading environment that their own skill. That’s fine a beginner at any task is going to experience wildly different results during there initial "learning" period.

But what of a reasonably experienced trader? What causes inconsistency in a trader that has been around the breakeven to profitable range for some years? The trader that has traded different markets and survived. Knows about money management and has a sound high probability trades that have been tested in the market. A trading plan that makes sense and even shown good profitability at times. What causes such a trader to veer from their trade setups? Not take trades when they are begging to be taken and what causes traders to pull out before profit targets are hit?

To give an example of the situation I am talking about I once tried out at a prop shop for a trading gig. Going in I had 2 weeks to show how I could trade the Futures market. It look like the perfect gig, I had a profitable record, they traded the same market mostly the same way I did(intraday) and the promise of trading size that my account would not be able to trade for years.

During the trial I think I made 40 points each day for the first 4 days which is pretty good trading 1 contract but by the end of the second week I had a heap of trouble hanging on to trades and also entering trades. So I was going nowhere. I would sit in the trading room and call out the next couple of ticks or think “this is going 5 points higher then back”. But I didn't trade it because my plan was looking for minimum 12-15 ticks with a 5 tick stop. So I started to stew and just watched trade after trade disappear.

As the last week wound down I knew I wasn't going to get the gig and started to place some quick trades in my own account and of course they all came in winners.

I didn't get the gig but it was the best failure of my trading career thus far. As the trial went by I got worse & worse. Why? It wasn't that I couldn't see the setups, they were there for sure. After having a good look at my effort I realised I wasn't a position day trader like I went to them as but a scalper. My trading plan was sound; it just didn’t gel with me. I was trying to trade a way that my brain didn't agree with. I could see for sure the next 5 ticks up and back yet I was trying to enter a position and hold on during what I knew was going to be movement against me. With the added pressure it was too much. I was out of my niche. And the end result was Inconsistency. Profitable for the first 4 days going to useless for the last 4.

 

[Trembling Hand]

Re: Inconsistency, not a bad sign but a sign for sure.

Probably a better example is one that doesn’t involve trading. Imagine how a football team would go if you took the gun forward and swapped him into the full back position. They would probably have some good games but their results wouldn’t be consistent (yes I know that some can do this) They would be outside their niche as defenders in spite of them knowing how to play football and having all the skills of an elite footballer. You would expect them to play with inconsistency. They would be attaching when they should be watching the forward they are on.

Conventional trading wisdom would say that in the example of my trading I need better discipline to stick with my trading plan. The coach would probably tell the forward now new backman that they were also playing without discipline as they run up the field leaving their man to do as he wishes. I think the discipline line is a load of crap. The fact that my plan fell to bits when I had a blow touch applied to my forehead had little to do with discipline and more to do with gravitating towards my nature trading style. Discipline will stop a fast blow up but if you’re trading not to your nature you are still going to struggle.

A quote from a book Enhancing trader performance (B.N.Steenbarger) has always stuck with me from that time

“When you have found your niche, you don’t need discipline to do the right thing: you won’t want to do anything else”​

 

[MRC & Co]

Re: Inconsistency, not a bad sign but a sign for sure.

Excellent post TH.

Very very important for everyone to realise, that you have to match your personal psychology to your own trading style (this includes what instrument you trade also). Funny how sometimes, you can just have an epiphany and realise something so simple but so true and effective!

A few questions, have you thought of going back to them now with your new style? (by the looks of your post and data of your good day scalping, their low brokerage would REALLY help)! How long have you been implementing your new style for now? How do you determine which way the price is going to move for your scalp? Any particular setup or more intuition?

 

[Trembling Hand]

Re: Inconsistency, not a bad sign but a sign for sure.

A few questions, have you thought of going back to them now with your new style? (by the looks of your post and data of your good day scalping, their low brokerage would REALLY help)! How long have you been implementing your new style for now?

I'm still in contact with them. They have seen some of my new results and offered some help which has been great but I'm now trading so much my brokerage is not much more than what they offer.

That was about 1 1/2 years ago.

 

[julius]

Re: Inconsistency, not a bad sign but a sign for sure.

trembling, as a scalper how much do you really benefit from trading a bigger book?

surely account size becomes insignificant because of slippage pretty quickly...

 

[Trembling Hand]

Re: Inconsistency, not a bad sign but a sign for sure.

trembling, as a scalper how much do you really benefit from trading a bigger book?

surely account size becomes insignificant because of slippage pretty quickly...

I guess it depends on the instrument. I only trade 1 contract on the HSI, about to add to that soon so I can't answer to that one yet. For the SPI I trade from 1 to 5 at a time the advantage of more contracts is you can scale out of the good trades and that makes a huge diff. I can trade as a scalper and then when I get on the odd ripper just take a little off the table then let the rest ride like a position trade.

I'm always getting out the calculator at the end of the month and thinking about what if I was an ES scalper with 200 to 600 odd contracts on the bid/ask. yep I'm a dreamer!!

 

[happytrader]

In another thread I made a comment about the causes of inconsistency being a signal that you’re not trading to "your" niche. If you are a beginner obviously you are going to be wildly inconsistent because your skill level is going to be low. In fact as many have found out recently their results have more to do with the trading environment that their own skill. That’s fine a beginner at any task is going to experience wildly different results during there initial "learning" period.

But what of a reasonably experienced trader? What causes inconsistency in a trader that has been around the breakeven to profitable range for some years? The trader that has traded different markets and survived. Knows about money management and has a sound high probability trades that have been tested in the market. A trading plan that makes sense and even shown good profitability at times. What causes such a trader to veer from their trade setups? Not take trades when they are begging to be taken and what causes traders to pull out before profit targets are hit?

To give an example of the situation I am talking about I once tried out at a prop shop for a trading gig. Going in I had 2 weeks to show how I could trade the Futures market. It look like the perfect gig, I had a profitable record, they traded the same market mostly the same way I did(intraday) and the promise of trading size that my account would not be able to trade for years.

During the trial I think I made 40 points each day for the first 4 days which is pretty good trading 1 contract but by the end of the second week I had a heap of trouble hanging on to trades and also entering trades. So I was going nowhere. I would sit in the trading room and call out the next couple of ticks or think “this is going 5 points higher then back”. But I didn't trade it because my plan was looking for minimum 12-15 ticks with a 5 tick stop. So I started to stew and just watched trade after trade disappear.

As the last week wound down I knew I wasn't going to get the gig and started to place some quick trades in my own account and of course they all came in winners.

I didn't get the gig but it was the best failure of my trading career thus far. As the trial went by I got worse & worse. Why? It wasn't that I couldn't see the setups, they were there for sure. After having a good look at my effort I realised I wasn't a position day trader like I went to them as but a scalper. My trading plan was sound; it just didn’t gel with me. I was trying to trade a way that my brain didn't agree with. I could see for sure the next 5 ticks up and back yet I was trying to enter a position and hold on during what I knew was going to be movement against me. With the added pressure it was too much. I was out of my niche. And the end result was Inconsistency. Profitable for the first 4 days going to useless for the last 4.

Hi Trembling Hand

I thought your post was most interesting in particular the paragraph I took the liberty of highlighting. It is always difficult being the new kid on the block and trying to prove yourself and to be accepted as one of them. The fact that they were trading pretty well the way you yourself do, suggests that you could easily have made the grade. Here are afew questions you might like to ask yourself. Do you think you received the kind of recognition you feel you should have for your excellent trading in the first week? When you called out the next couple of ticks but didn't act on them yourself, were you actually looking for support? Do you think it would have helped you push past your resistance point if you had received support? If you didn't receive the recognition or support did you feel resentful or discounted?
Do you think self sabotaging yourself by trading badly was a way out of this situation?

TH, obviously I could be way off the mark here and I do apologise if these questions are totally annoying more than a revelation.

Cheers
Happytrader

 

[Trembling Hand]

Do you think you received the kind of recognition you feel you should have for your excellent trading in the first week? When you called out the next couple of ticks but didn't act on them yourself, were you actually looking for support? Do you think it would have helped you push past your resistance point if you had received support? If you didn't receive the recognition or support did you feel resentful or discounted?
Do you think self sabotaging yourself by trading badly was a way out of this situation?

Nah don't think it was like that as far as recognition goes. It was never about a couple of days but the overall result. I really didn't give a toss about the other traders there was no point. Some were trading 10 times the volume or more.

If I averaged 20 ticks each day over the two weeks I reckon I would of been close and could knock that over now in an hour or two but when trying to do it with a bit of pressure that's when the problems sprung up. That was when I came to the realization that my trading plan, although it was a reasonable plan, was not suited to me.
And I haven't look back since. Like I said it was the best failure of my trading career.

 

[howardbandy]

Re: Inconsistency, not a bad sign but a sign for sure.

Excellent post TH.

Very very important for everyone to realise, that you have to match your personal psychology to your own trading style (this includes what instrument you trade also). Funny how sometimes, you can just have an epiphany and realise something so simple but so true and effective!

A few questions, have you thought of going back to them now with your new style? (by the looks of your post and data of your good day scalping, their low brokerage would REALLY help)! How long have you been implementing your new style for now? How do you determine which way the price is going to move for your scalp? Any particular setup or more intuition?

Greetings all --

I have a different take on the psychology issue.

I think the proper order is for the trader / system developer to define those features that he or she thinks are important before beginning to design or evaluate systems.

After the objective function has been completely thought out, then code them into the trading system development platform's language, and develop trading systems that score well using that objective function. At the end of the development process, any system that scores well and passes the tests of statistical validity is certain to be in agreement with the traders psychology, is likely to be profitable, and the issues of cognitive dissonance disappear.

Thanks for listening,
Howard

 

[MichaelD]

Re: Inconsistency, not a bad sign but a sign for sure.

I think the proper order is for the trader / system developer to define those features that he or she thinks are important before beginning to design or evaluate systems.

Totally agree with this, but I'd also suggest that first successful traders need to make trading plan and trading errors and survive them to learn this.

It's all very well to read about the necessary steps in designing a system/strategy when you're starting out, but in the beginning, you can't wait to start MAKING MONEY and so you can't see the point of "wasting time" with all the money/risk management and psychological stuff. It's only later that you figure out that the game is all about preserving capital and the profits come as a consequence of this and your psychology stands as the monkey in the room ready to sabotage your efforts.

TH - a truly great description you have given here of external factors influencing your trading adversely;

- trading with a defined goal in mind instead of simply accepting what the market offers (= trading with scared money)
- trading with the pressure of others looking on (you say this had no influence but I suggest that it did have).
- comparing your trading results with others

(not criticizing, merely observing)

 

[Trembling Hand]

Re: Inconsistency, not a bad sign but a sign for sure.

- trading with a defined goal in mind instead of simply accepting what the market offers (= trading with scared money)
- trading with the pressure of others looking on (you say this had no influence but I suggest that it did have).
- comparing your trading results with others

Yes I agree. I was trading with a gun to my head no doubt. Not only trying to get the job but all my family and friends knew where I was and how much I wanted it. So we all know what that does to taking losses and trying to take the hard trades. And they knew it as well. They offered for me to stay in the office on the sim for how ever long it takes. But a week or two later I new what I needed to do to trade well and haven't looked back since.

But the interesting thing about the whole exercise was that I gravitated to how I *wanted* to trade. In spite of achieving some success at other ways. I guess that is yet another thing that makes this game hard. Lots of methods looks sensible but whats going to really gel with you.

 

[el caballo]

TH,

Fantastic posting, and fascinating to hear the thoughts of a professional trader.

Excellent!

 

[julius]

TH - how do you deal with the off days when the market is out of sync and/or your mind is crook ?

do you reach a point where you just stop trading for the day ?

 

[Trembling Hand]

Differently have a max loss per day where I stop all trading.
Looking back through my old results and take say the worse 10 days and halve them my account would be a lot better(not to mention also my head). So It certainly makes sense to not fight the days you just aren't seeing the ball right.

I also roll into my max size as I build profitability during the start of the session. If I'm not doing well I will not trade so often as well as not with size so that's also help reduce the bad days. abit

 

[julius]

Roughly what %drawdown, number of losers, etc do you call it a day ?

We trade different styles - I'm more into intraday swing plays - but I do get the similiar pattern with my on/off days. I reckon I'm around 80-85% profitable trading days, less than that on a per trade basis, but I get smashed on my off days, which hurts the account a fair bit.

 

[Trembling Hand]

Its set at 60% of an average positive day.

What really Sh**s me is when its the brokerage that triggers it towards the end of the day. If I don't get positive early and just start churning to nowhere my brokerage adds up pretty quick then a small dip into negative territory triggers my day stop. then I go and kick the dog