When you should change your trading strategy

It's natural for people to find change difficult. They prefer to repeat the same things day after day, make a habit of it, and try not to think about it much because this is the easiest way to spend their time.

With trading, repetition is more difficult because the market is constantly changing. Remaining flexible and adapting your strategy to market changes requires experience and sometimes much effort. You may even need to change markets to be successful in some situations.

Changing your trading strategy steps:

Step 1. Understand if there's a need to change your strategy

It is difficult to recognise the need for a strategy change because it is easier to do the same thing every day. However, analysing your trading performance will help you understand the need to change. You will even want to change.

If your trading profits have been declining over several weeks, then you are at a point where you need to change your trading strategy. It would be best if you got into the habit of analysing your trade results so you can understand the need to change.

Causes of poor trade performance

1: The strategy is not suitable for the current market.

It is often the case that the strategies need to be realigned due to a changed market analysis. For example, suppose the method you use is trend-following, and the market has been quiet recently. The strategy will need to be revised. You should change to one that's suitable for the current market. Trend-following techniques are better when the market is trending, while range-following strategies are for when the market is in a range.

2: The strategy is not being executed correctly.

Reviewing the chart of your trades with noted entries and close points will show more objectively whether or not you were able to follow the trading rules. Many traders stumble here and realise they didn't execute their strategy correctly. For example, they wanted to enter at this point in their trade plan but were late. In this case, if you can follow the trading rules, your performance will improve significantly.

Step two. Understand what needs to be changed

Changing too many things at once is difficult to accomplish and makes trading more difficult. You may end up with too many rules, and even the rules you have made may become impossible to follow again. Make one change first, and then repeat the changes little by little with a long-term view. Once you have improved some of them and achieved some results, you can introduce a second change.

Look for some major losses in your trade records. Analyse what is in the pattern that is leading to the losses.

✓Is the failure to follow the stop-loss leading to losses?

✓Is trade overload worsening your win rate?

✓Does the trader not remain profitable because of taking profits too early?

✓Do you trade in a variety of markets?

✓Did you not prepare for the trade before opening the position?

Step three. Reflect on your performance

If you want to improve your trading, start by developing new and good habits. Before you trade, write down what you need to do to improve your results.

Example.)

-Do not exceed a cumulative loss of up to 10,000 yen today.

-Take no more than three trades a day

-End today's trades after two losses

When trading, concentrate on following through with your trading rules rather than earning money. After every trade, keep a record of whether you followed the rules and make this a daily habit. Continue to aim to follow the rules 100% of the time. You will gradually become more conscious about following the trading rules.

When you have broken free from one bad habit, focus on improving another behaviour. A series of small daily improvements will make a big difference in the long term. Change is difficult and takes time, but once you have learnt how to improve, you can take advantage of the many opportunities that will benefit you from the market.