Lesson 38 – Consistency when trading, for Forex Traders
When it comes to forex trading, to be successful you have to make sure you achieve consistency. But how does one ensure consistency?
To do this, we need to make sure all erratic emotion is taken out of all of our trades, instead they must be as informed and as objective as possible.
To achieve this as best we can, we should stick to our set trading plans and strategies as much as possible with no room for deviation.
This actually simplifies our life a lot since all you need to do is focus on spotting clear-cut scenarios that are ripe for exploitation. After this, we need only to monitor our positions to observe how well they do.
Consistency in our risk level
Making sure we stay consistent in the amount of risk we expose ourselves to in each trade. If we expose ourselves to more risk than what we can handle, our account balance and ability to trade may become crippled if our trades go wrong. Capital preservation is crucial, so we definitely want to be avoiding this.
Make sure to calculate what amount of your account balance you are comfortable with risking per trade, and stick to it. Previously in this course, we suggested that around the 1% level is reasonable.
Make sure you trade consistently with your lot sizes to make sure that the exposure of your trades remains consistent.
Later on, once you’re comfortable with that sizing and track record, you can move on to larger lot sizes.
Consistency in our risk-reward ratio
It’s very common for traders to stick to the same RRR in order to more easily conduct analysis to compare their overall win rate to their required or desired win rate.
Let’s say you’re trading only with a roughly 1:3 RRR. In this case, if you keep track of all of your trades properly, you will easily see how you’re performing relative to the required 25% win rate to break even.
If you keep switching your risk-reward ratios, it becomes a lot more difficult to do an overall analysis and focus on why specific trades performed poorly.
A way to help get around this is to record your trades in a journal with its RRR and result. That way, later on, you can analyze and compare the different levels of RRR to see which is best for you. There are a lot of tools you can find on the internet to create this kind of journal.
But still, as a beginning trader, try to stick to one RRR so that you can really learn to understand that particular niche of trades. This will speed up your learning process, rather than being spread out across multiple RRR levels.
You should also note that the learning required to become a low RRR trader (e.g 1:1) versus a high RRR trader (e.g. 9:1) is very different. So, it’s really best to keep to one niche and master it. Your account balance will thank you for it.