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What to Consider Prior to Changing Strategies


At some point throughout your trading career, in fact, in quite a few points, you will be required to change up your trading strategy. While it may have been working really well at one point the markets will not remain consistent forever and they will change, you will then be required to change with them, if you do not, then you are putting yourself into some additional risk and could be putting your account in danger, as your strategy may not be as effective in these new conditions as it was in the ones that it was created for.

There are a number of different things that you can do to help you prepare to change your strategy, these can either be used to help you to alter your current one or some of them can be used to help you adapt yourself in order to use a completely different strategy that varies a lot from what you are used to, so let’s take a look at what some of these things are that could potentially help you change your trading strategy.

The first thing that you need to be able to do is to understand why you need to make a change, there could be a number of different reasons for this. Maybe you are currently risking too much of your account per trade and so you need to scale back your lot sizes. Maybe the markets have shifted, your strategy worked well before but there are now different trading conditions that it may not function at 100% in, so you need to make some changes to match the markets. Maybe you need to change things up because your risk management isn’t quite working or your risk to reward ratio is not quite right, whatever the reason is, you need to have a good understanding as to why you need to make that change, once you know the reason, it will be easier to focus your changes on what will resolve the current issue, rather than changing things that may not actually need changing.

It is important that you only make a single change at a time, while there may be multiple different things that need changing for your strategy to be ready, it is important that you only do it one thing at a time. The reason for this is that when you make changes, they can either work or not work, you do not want to be changing 5 things at a time if one of them is not working how will you know which one it is? When we are changing just one thing at a time, we can see straight away whether that one change is effective or not. If it is not, then we can adjust again, if it is then we can move onto the next thing to change. Of course, changing some things can then also affect something else that you had previously changed, but at least when doing it one thing at a time, you are able to better track what the effects of each change are and whether individual changes have worked well.

You also need to have a good understanding that once these changes have been made, you cannot just leave them, things will be constantly changing so you need to be prepared to continue to make changes as the conditions of the markets continue to move on. A strategy is never complete, this is something that a lot of traders see to forget, no matter how much you have worked on it, it is not complete, there will always be things that need changing and adapting, this is due to the fact that the markets will never stop changing themselves, you must stick with them no matter what they decide to do. So while your strategy has been changed and is now working, you will need to make further changes in the future. I mentioned that a lot of times just then, hopefully, that helped it to sink in, once again, the markets will always change, so you will always need to adapt your strategy.

So you are looking to make some changes, where are you going to do this? Are you going to make the changes directly onto your life account or are you going to implement the changes onto a demo account? Hopefully, you went with the latter option. You should not be making any changes on a live account, you do not know what effect these changes are going to have on your strategy or the profitability of the strategy. This is why we always test all changes on a demo account, if it works, fantastic, we can then move them over to the main account, but what if they do not work, and we are using a demo account, it makes no difference to our live account, we can just revert back and try again with zero risks. If you were to attempt this on a live account and it goes wrong, then you have put your account in danger and could potentially lose a lot of money if things go wrong and you cannot rectify it.

What if you need to go with a completely new strategy? One that you have never used before. You have been using your current strategy for quite a while now, so making the huge leap onto a completely different strategy can be a little daunting. Some of the reasons why you may need to do this could simply be that your current strategy does not suit your style of trading, or it does not work in the current trading environment. When you make such a huge change, it can be hard to forget some of the things that you had been using in the past. You need to understand that you are starting fresh, ignore all the little things that you may have done with your previous strategy, you need to follow the new rules that you have set out and only those rules, when you try to take in some of the little extra things that you did with your previous strategy, there is a good chance that they can contradict the things that you are doing with the new one, so stick to the new rules, not the old ones.

Going along with the above when you make small changes to your strategy, it can actually be quite hard to get old habits out of your mind, you are so used to doing the same thing over and over, as soon as one little bit changes, it can be hard to adapt to that. This is far more prevalent in those that have changed just one thing if you have been using your strategy a certain way for a long time, you can naturally want to do things the old way, you need to set reminders about the changes that you have made. When you change your entire strategy, it is easier to remember the changes than it is when you only change a very small part of it. So set yourself reminders or put something up on the wall to remind you of the change that you made and what you need to do to stick with it.

So those are some of the things that you should be keeping in mind when you decide to change up your strategy or even go with a completely new strategy, it is important to know that you will need to keep on adapting and so getting these things into your head beforehand can make thing booths easier and safer when you eventually implement any changes.


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