Best Practices Inwards Trading: Using Rules To Accomplish Consistency Of Performance

Think of the successes of dandy sports teams or businesses.  In in addition to then many cases, consistency inwards execution is a mutual feature.  The dandy football game squad doesn’t but block in addition to tackle well; they produce in addition to then every play, every game.  A line of piece of job concern similar FedEx or UPS doesn’t but deliver on time; they hitting their fourth dimension targets consistently.  How tin traders laissez passer high levels of consistency?
The response is past times turning trading practices into trading rules.  Rules are what plough best practices into habits–and habits are what give us consistency.  Contrary to pop conception, dependent acre is non near forcing yourself to produce the correct thing.  It’s near turning correct things into habit patterns.

Today’s best practise comes to us from reader Markham Gross (@MarkhamGross), who is the founder of Anderson Creek Trading, LLC.  He explains how the move of rules in addition to systems convey consistency to trading:

“A trader or investor cannot command markets or the exterior world.  All that is nether the trader’s command is his or her reactions to what is happening inwards markets or what is perceived to move happening inwards markets.  Therefore, systems should move applied.  The best systems are oft simple.  Spreadsheets tin piece of job equally an implementation tool in addition to but about calorie-free programming skills volition also dice a long way.  Systems should move comprised of specific rules for when to enter, leave of absence for loss, leave of absence for profits, in addition to size of the positions.  These rules tin agree the trader’s personality in addition to temperament.  They should move testable.  Although in that location are limits to backtesting, performing but about backtests volition attention the trader know what to hold off in addition to then they are non surprised past times normal drawdowns.  To approach the marketplace without rules on a daily or weekly footing would move a mistake.”

What I discovery inwards my piece of job amongst traders is that many of the best piece of job inwards a hybrid fashion:  they brand decisions on a discretionary footing *and* their decisions are guided past times explicit in addition to tested rules.  For example, 1 trader I worked amongst years agone examined cost breakouts that tended to proceed inwards the direction of the breakout versus those that reversed dorsum into the prior range.  He constitute several factors differentiated breakouts from fakeouts, including the book of the move, where the motion stood amongst honor to longer fourth dimension frame activity, in addition to the fourth dimension of 24-hour interval of the breakout.  He turned these factors into a checklist, in addition to then that he exclusively took breakout trades that scored highly on his criteria.  Those rules non exclusively helped him discovery winning trades, but kept him out of many losers.  

When that trader starting fourth dimension generated the rules, he used the checklist everyday to guide his actions.  Eventually, the criteria became venture trading habits in addition to he implemented them routinely.  Repetition is the woman raise of habits in addition to habits are the backbone of discipline.  Turning your successful strategies into rules is a dandy agency to ensure that your best practices dice robust processes.

Further Reading:  Success equally a Habit
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