Lesson Overview

Long-Term Consistency

Consistency is like a marriage, over time it gets better and more solidified. Today I want to show you with hard facts why the longer you trade the more "consistent" you'll become.

Using probabilities and a simple roll of the dice example looking for the combinations that get us to a total of 7 showing, you'll see why our odds improve as we make more rolls.

In trading, this means you have to make lots of high probability trades in order to ever get close to reaching your desired level of "consistency".

More Discussion

Was This Helpful? Add Comments/Questions

  • William Stockholm

    Kirk,

    I could not help but think about playing craps when you
    discussed the probability scale with the dice. Not that I play it, but I
    have a buddy I’ve watched a couple of times that does. Given your
    explanation utilizing dice, I now see why 7 is the number that you “crap
    out” on. The casino has better odds with that number. Of course, I
    see where this applies to option trading as well. Enjoyed the lecture;
    insightful.

    Will

    • Yep and isn’t it funny that they call it “crap out” haha

  • Thor

    I will be consistent all I need to do is figure out how to make the highest probability trades.

Show Video Transcript +

In this video, I want to talk about this concept of long-term consistency and how you can get there with your trading. This starts with a question that I'm often asked by fellow members and from people that I coach.

They always say, “Kirk, I want to be more consistent with my trading and portfolio. How do I do that? What are the steps I need to take to be more consistent?” We all want to be more consistent in what we do and especially when it comes to investing our hard-earned money.

We don't want to see profits disappear so quickly. But what I often find as I’ve talked about many times is that people are not in this business long enough to see the fruits of their labor.

I often talk about the idea that you need to be committed to doing this system and trading high probability trades for months, years, and the longer that you stay in it and stay persistent with the strategy and consistent with making trades, the better your consistency will be.

If you’re in this for three months or six months and you don’t see the results, you just haven't stayed in long enough. You might see results, to begin with, but often, we get into trades that go bad from the beginning, and it's not that you’re making bad decisions.

That the system is flawed, it’s just that you haven't been in it long enough. Today, I want to present to you this idea of long-term consistency by the concept of throwing a pair of dice. We’re all familiar with dice; six-sided dice, one through six on each side.

If our goal in throwing dice is to get to some likely outcome that’s a high probability outcome, in this case, it would be throwing the number seven with two dice.

The number seven is the highest chance of happening every time that you throw a dice because there are many different combinations that could create seven. You could have one and six; you could have two and five and four and three, etcetera.

A low probability roll of the dice would be snake eyes or throwing ones or would be throwing a 12 because there's only one chance on each dice that you throw a 12 or one chance on each roll of the dice that you throw a snake eyes, but there’s a lot of opportunities to throw a seven.

This is where people obviously understand it at this point. Probably most of you are saying, “Okay, I get that, Kirk, this idea of throwing a seven.”

But if we take this concept and then apply it to long-term trading, it has the same fundamental implications and that is mainly that the more times you roll the dice, the closer and closer you get to averaging out to somewhere around a seven or somewhere in the middle of your probability range or your targeted probability range.

If we have four different graphs here, you can see that if I only throw the dice five times, so I just make five single trades and I’m looking for that seven, but I only throw the dice five times, I may end up with a two and a four and I may end up with a seven then I may end up with a 10 and 11.

People that come into this business, this is exactly what they do, they make five or 10 trades, and some of them don't go right. Sometimes you’re looking for a seven, you're looking for that profitable trade, and you get a two and a four.

You get trades that are marginally bad and one trade that’s really bad, and they immediately quit out of business. They say, “Trading is wrong. This system is flawed. These guys don’t know what they’re talking about.”

But all it takes is just the ability to do that same type of trade over and over and over again. In this case, you make more trades, and you have a lot more frequency here, you’re still rolling the same dice, but now you have more frequency.

Now you can start to see that our curve or our probability and expected curve is getting closer and closer to that seven that we’re looking at. You keep throwing the dice; you keep making more trades. You still might have some outliers.

There's no doubt that we still might have some outliers out there, some trades that don't go so well and maybe some trades that go high against our positions, but at the same time, we’re starting to see that a lot more of our trades are stacking up in this middle range.

This higher probability range that it should. And now, we get to the point where we’re making a couple of hundred to a couple of thousand trades over the course of a year or two years or three years.

Now you can see that your ability to be consistent is directly related to the number of trades that you're willing to make.

That’s why I said at the beginning of this video, and I talk about often that you have to be committed to this business and believe in these numbers and probabilities because it does take a lot of time to see to see consistency.

Consistency is not something that happens overnight. It happens over the course of many months and weeks and even years. But here's what I will tell you to wrap up this video.

If you want to be truly profitable and consistent, I guarantee that if you do things right and make the right types of high probability trades, it is only a matter of time that you’d see success, meaning that the longer you stay in this business, and the longer you make these trades.

The more of them that you make, whether that’s over weeks, months, years, whatever the case is, the more consistent and the more profitable you will become.

That's an incredibly motivating factor for you because you should know that it's just a matter of time and being consistent and persistent with your trades. This video was pretty simple; we only went through a couple of slides.

But it's extremely powerful, the type of stuff that we’re talking about and hopefully, this challenges a lot of the thoughts that you’ve had before about making options trades and making a real business out of trading.

As always, if you guys have any comments or questions, please ask them right below on the video lesson page. I’ll get back to all of those. Make sure that you guys have all the answers that you need and happy trading!

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