I believe from my own trading experiences, from reading material by many trading authors and from reading Mark Douglas’ books and discussing the subject with him in the past that our primary trading goal must be to achieve consistency and objectivity in our trading and investing activities. Why?
To explain, let’s start by defining these two mental skills:
• The dictionary definition of consistency is: “constant to the same thoughts and actions” or “conforming to a regular pattern or style, unchanging”.
• The definition of objectivity is: “uninfluenced by personal emotion, prejudice, opinions or surmise” or “having real existence outside of mind, not subjective”.
These take us into a world that is often vastly different from the one that most of us generally occupy. How often are our decisions and actions changed or swayed by other circumstances, interference, or opinion? Even for the most composed and tranquil of us, someone seen as the hypothetical ‘model of consistency’, it’s not easy to maintain the same approach to all things 100% of the time, especially in our increasingly fast-paced world with technology bombarding us with opinions, views and alternatives.
In the heady atmosphere of the stock market, being consistent and objective is absolutely essential; it is the foundation to long term success. Yet the great majority of traders are inconsistent and subjective—exactly opposite to how they should be for trading. Worse still, in an inconsistent and subjective state of mind it is virtually impossible to measure how consistent and objective you are with your thoughts and actions.
Our ability to achieve consistency and objectivity when trading and active investing is tested to its limits during times of sideways market action and when the market is see-sawing along in a range, chopping up and down with no clear trend developing. Even when we are using a robust mechanical system with a proven track record if we have not mastered the necessary consistency principles our discipline and ability to stick with the system will tend to falter, and we will begin to doubt the system , ‘fiddle’ with it, or cease trading it all together. The market will always provide outcomes to justify doubt and uncertainty for the inconsistent mindset.
The results of this can be far from beneficial over the long term from both a psychological and financial perspective. Psychologically we have now sown the seeds of doubt in our own minds, and without the mental strength and skill set to overcome these negative thought processes we will continue to struggle to achieve the consistency and discipline we need in order to become a long term profitable trader. Financially, we will give up the opportunity to participate in the profitable trades when they do come along. Sitting on the sidelines, we will miss many good profitable trades that will come along when the market emerges from this sideways period and the trend once again roars into action.
So, even if you do fully accept, in your logical mind, everything written about the importance of achieving consistency and objectivity, you will be unable to measure and achieve this unless you embark on a process of changing your current subconscious state of mind with respect to trading.
When you ultimately understand the concept of consistency at a deeper level, you will realise that objectivity is actually a subset of consistency. You will not achieve consistency unless you become objective, although you could become objective but still not achieve consistency!
Let’s see, now, is that another paradox ..?
Excellent advice Gary for all of us engaged in fast or slow trading systems.
Percy Alan AM
A paradym “complete” Gary.
Internal Foundations well discribed.
Great concepts and makes alot of sense!How one gets there and what should i or we should do financially on the way to achiving a high degree of cnsistancy and objectivity.
In reply to John:
Thank you for your comments. I believe Gary plans to continue the topic of consistency and objectivity in next weeks Journal post. I’m sure he will have valuable advice on how to achieve these skills.