In last week’s post I discussed the concepts of consistency and objectivity in relation to the market and our trading and active investing activities. Over the next few week’s I will be taking a look at how we can achieve these skills that are essential to our long term success in the markets.
While it is most definitely necessary to establish financial outcomes to achieve, the most important targets that a trader can set are skills and process-orientated goals. I strongly suggest you make becoming consistent your highest skills goal.
The suggestion that acquiring consistency and objectivity as essential prerequisites for sustained, profitable trading is certainly not a revelation. Experienced traders such as Mark Douglas, John Murphy, Martin Pring, Stan Weinstein, Joe Krutsinger, Jack Schwager, Jake Bernstein and Larry Williams have all written about it.
But this may just be the first time you’ve seen a practicable step-by-step process on how to achieve it. Let’s be clear, it is not something that you can put a timeframe on, and it certainly is not time dependent. It is focus and commitment dependent. How deep is your desire and how disciplined can you be with the learning process? It will require you to become a student of the activity of trading.
Acquiring these skills is a pre-requisite to achieving any financial outcomes that you have established. This means that no matter how focused you are on any goals that you have set, it is highly unlikely that you will achieve them until you have acquired the necessary ability to consistently complete error-free trading processes and error-free execution.
And here is a vital point: while consistency and objectivity can be measured as a result of the physical actions that you take, they are actually mental skills which manifest themselves as outcomes through your execution of trades.
It’s a three-part equation:
1. The level of outcome that you achieve is directly proportional to the level of development of your mental skills.
2. The major role that setting specific financial goals plays is to keep you focused and committed to improving your mental skills.
3. The degree of focus and commitment that you put into improving your mental skills will determine the level of financial outcome that you reach.
Each interlocks with the other and keeps you progressing on your trading journey.
Given that consistency and objectivity are states of mind, how do you know whether you are actually consistent and objective when it comes to trading? You might be consistent and objective in other walks of life–such as your profession, your hobbies or a sport that you play–but not necessarily in your trading.
One answer is in results. The outcome of consistency and objectivity is over a long period of time, a steadily rising equity curve that rises by more than the market index. If you continue to have a steadily rising equity curve that outperforms the market index, then your trading state of mind, and hence your trading actions, will exude consistency and objectivity—a ‘win-win’. This will occur in spite of short term periods of drawdown and negative returns.
As Mark Douglas states in his book “Trading in the Zone”, consistency is a function of a carefree, objective state of mind where you neutralise existing self-sabotaging beliefs and make yourself available to perceive and act upon whatever the market is offering in any given ‘now moment’.
Achieving this state of mind is not necessarily an easy thing to do. However, once you have, it becomes a part of who you are. All your thoughts and actions will automatically be manifested from ‘who you are’ and will be according to your consistent and objective state of mind. Consistency and objectivity will become first nature to you and the process of trading will become effortless. This is the realm of ‘non-doing’ or ‘not trying’, the realm of the consistently successful trader, where positive outcomes just seem to happen, the :- realm where freedom is attained.
Kris Kristofferson wrote so succinctly in Me & Bobby Magee, his hit song of the 1960s: “Freedom is just another word for nothing left to lose”. I believe he is saying the feeling experienced when you have nothing left to lose is the feeling of total freedom—the feeling that comes when there is no resistance, no struggle, no strain. The action that you execute is effortless. This is the feeling that traders attain at the highest level of the trading spectrum.