As a forex trader, you should always strive to improve yourself.
Sometimes that means actually improving yourself (better health, better schedule, better shape, etc), but most of the time it means improving your trading performance. To do this, it’s important to have a regular look at your strategies and see if there is anything you can do to make them perform better. Improving your strategies will go a long way and might turn a decent ~2% per month into much nicer results.
The whole point of improving your Forex trading strategy is usually to make better returns. Sometimes however this isn’t the case, and I’ll cover that in one of the points I’m presenting now.
Tip #1 – Don’t Improve Your Forex Strategy
Wait, what? 🙂
That’s right. Sometimes, it’s more efficient not to try to improve your strategy. Many Forex traders, with improvement on their mind, try to over optimize their Forex trading strategies and end up completely ruining it.
My point is don’t try to change things that work – If you’re making a couple percent per month and are satisfied with that, don’t change it.
Tip #2 – Improve Your Money Management
Money management is “the” big thing in Forex.
I’m personally convinced – and so are my colleagues – that the money management techniques of a trader are what make or break him. I could give you the best strategies in the world (actually, I do in my Forex trading course) but if you were to apply them without any proper money management you would go broke in no time.
To improve your money management, you must start testing it. Money management is very close to trade management. There are countless options when it comes to combining the two. If your strategy is currently working with a static profit target, see how it would perform if you were to trail your stop loss instead. What if you trailed it below every candle? Or below every swing? Or below every fractal swing? What if you did partial closes at 1:1 risk reward and then trailed the remaining size with your stop loss?
There are a ton of options. Test a few of them manually and take notes of which ones work best.
Keep two things in mind: One, don’t pick a money/trade management technique that you can’t apply in real life. If the best performing strategy requires you to stay glued at your computer for 8 hours a day but you have a day job, this is obviously not for you. Two, compare returns with risk. Sometimes a technique will give you great returns but only because you’re risking way too much. Keep these things balanced.
Tip #3 – Back Test… a LOT
I love to back test. When I first started, I spent countless of hours back testing Forex trading strategies. I would go back 5 years in charts and back test for days. This did many good things for me.
First, it gave me a ton of experience with the strategy. After testing 5 years of data for a strategy on 5 to 10 different pairs, you pretty much know the strategy inside out.
Second, it gave me a lot of chart time. Chart time is crucial for beginners. Nothing will ever beat actual real time chart time, but back testing chart time is worth something. If you spend a lot of time back testing, you’ll learn things without even knowing it. You’ll see and remember the patterns.
Back testing will do a lot to improve your Forex trading strategy. It will keep you alert to the rules. If you’re trading D1 and rarely have any entries, do some back testing on H1. Back testing mindfully will also give you a ton of ideas on how to improve your Forex strategy. After seeing hours, days, months and years of candles you’ll pick up on some stuff. Randomly you’ll think “huh, what if I did this?”.
Keep your eyes opened and start improving your Forex trading strategy right now!
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