Experimenting with your Forex strategy is an important part of every trader’s career. It will help you deal with boredom and, more importantly, improve your strategy.
It is also something that you should look toward when you have more experience. Having a good grasp of the basics and your own trading method will make experimentation much more enjoyable and profitable.
This is mainly because everyone sees the charts in a different way. My analysis will differ from yours even if we are both price action traders.
That logic follows through to your strategy. Something that works for me may not work for you, and vice versa.
Experience with your trading is vital if you want to get the most out of experimenting.
Knowing how to experiment with your strategy is actually a big part of a successful trader’s skill set. I always say that independence with your trading is important – experimenting is another addition to the pile of reasons as to why independence is essential!
No one else can experiment for you! Like I said, what works for one person may not work for you.
But you need to experiment safely, without taking on a lot of risk, and know when to implement any changes. It can be difficult to know how to do all of these things.
In this post I’ll be taking you through some of my best tips so that you can start experimenting today!
Where Can You Experiment?
Changing and tweaking your strategy is not something you should do recklessly. Your strategy is valuable and something you should be able to rely on as a source of income.
Making changes to that can have seriously negative impacts on your trading and profitability – especially if you don’t do it right.
So the first thing you need is a safe place to practice and experiment!
That is where a demo account comes in real handy.
You can practice and tweak as many things as you want here – it won’t impact your live trading results. The charts are the same, the analysis is the same. You just don’t lose any money.
However, there is a drawback to using a demo account.
You can never truly replicate live trading with it.
So your mindset may be different when demo trading – that is something you will have to consider when you implement any changes. However, there is an aspect of experimenting with your strategy that will help reduce this problem.
Data is King
Whenever you try anything new with your strategy, you must log all of your results. How can you get an idea of how effective potential changes are without any data to analyse?
Data is king in this regard.
But you can’t just do ten trades, check the data, and then implement the change. That is simply not enough time or data.
The amount of data you collect will impact how accurate you can assess the profitability of the change. We obviously don’t want to demo trade forever, but 100 results will give you a much better picture than 10 results.
This collection of data gives you an objective aspect to look at. You can’t have a bias that something works if the data says otherwise.
So, we know how to start experimenting and that data is integral – how do you get new ideas to best fit into your strategy?
Trial & Error
If you have been following me for a few years, you can see a change that I have made to my strategy in only the last year.
I included the 200 Moving Average (MA) onto my charts.
I know – I have said in the past that I don’t use indicators. They lag behind current data and they clutter your charts.
But I have also learnt over the years that you have to be willing and able to adapt.
I knew the 200 MA was something that many big banks and hedge funds used in their trading. In terms of placing it on my charts, it didn’t add too much clutter to the chart.
So, I started a year long process of testing the 200 MA on a demo account. I collected data and results on over 100 trades.
There was a lot of trial and error – the way I started out using the 200 MA was completely different to how I was using it at the end of my testing phase.
That trial and error is crucial to any change you want to test. I don’t know of any trader that hit the nail on the head straight away with new experiments.
You need to find the scenarios that don’t fit with your changes. When is the change the strongest and the weakest? How is it best utilised – in trends or reversals?
These are all questions that require trial and error. Which leads me to my final point…
Be Patient
Don’t rush through this process. The less patient you are with your testing, the more it will cost you when you implement it into live trading.
Or worse – you don’t give a change enough time and data so you give up on it.
You could miss out on a great addition to your strategy!
Over the years, I have seen so many additions to my price action strategy from my students. It is a large part of why I have never strayed from my strategy. It provides a foundation that you can build upon and eventually create something that is wholly your own.
The Forex4noobs community is the most impressive in that regard. My goal is always to lead traders to independence. The strategy I created is made better by changes that work for you!
What I have seen as the most important aspect of implementing those changes is patience. That is the common thread for all the successful experiments over the years.
A slow introduction is a good introduction. You don’t need to jump into live trading until you have enough data to analyse.
Be patient with your testing. You need to see the changes from all angles and as many scenarios as possible.
If you do that, you are setting yourself up for success!