Updated from its original posting on 08-04-2011
What do Michael Jordan, Tiger Woods, and Leonardo DiCaprio have in common? They all excel in their respective fields and are always looking for ways to improve their skills. They expose themselves to different environments to try out different things to see what works best for them. In other words, they embrace change.
Michael Jordan changed his game from relying on pure, explosive athleticism to having a sweet, fade-away jump shot to score points. Tiger Woods has modified his golf swing several times to remain an elite golfer. Even Leonardo DiCaprio, who started his acting career as a teeny-bopper heartthrob, has matured into more serious roles and even made a name in the industry as a film producer.
These elite performers owe much of their success to embracing change, and this is what we, as forex traders, should strive to do.
The greats follow through with their changes and never stop practicing, while the not-so-greats tend to get lazy and feel lax over time, eventually slipping back into old habits. As a result, the greats get better, and the not-so-greats do not grow.
Naturally, embracing change is not easy. And even if a trader were to step outside his comfort zone to try new methods and techniques, he may not have the perseverance to push through if things get rocky.
One mistake that traders make when first implementing changes to their trading style is concentrating immediately on the results of the change. More specifically, they focus on trading profits and losses (what did we say about doing that, huh?).
A trader may initially see that the changes have generated profits. Naturally, the trader feels that the system is profitable and immediately starts trading live at his usual risk levels. The problem with this is that the trader is not fully aware of the all the effects that the implemented changes may have on his overall trading system and risk management plans. This problem stems from the lack of experience – both in understanding the new parameters of the system and how to deal with the changes to the system.
Many traders try out new methods, but lack the fortitude and discipline to practice and gain the necessary information to effectively gauge whether the results are meaningful or not. They stop half way, mostly because they feel that it isn’t worth the time, effort, and/or pain to really see whether the changes can be profitable.
In the end, if a trader gets burned, both mentally and financially by trying a new trading system or trading tool, it can be quite traumatizing. It may even cause the trader to refrain from exposing himself to change, thereby stunting his growth as a trader.
A great way to implement change is to create a controlled atmosphere where you can freely make mistakes. By doing this, you are able to speed up your learning curve WITHOUT running the risk of permanently damaging your finances.
Two ways to do this is by reviewing charts and trading a demo account.
1.) Chart Reviews
While reviewing charts lacks the feel of real-time trading since you are looking at everything in hindsight, it helps you figure out what you could have done during the day. The next time a similar setup appears, you’ll know what to do. It’s kinda like watching a replay of your basketball game. You can see all the wrong and right things you did and adjust accordingly.
2.) Demo trading
Demo trading is helpful as it allows you to participate in the market real-time without putting your capital at risk. You can take as many setups as you want, which enables you to accumulate weeks’-worth of trading experience in a just a single day. You can rehearse a trading system repeatedly or focus your attention on trading specific news reports.
By doing these two exercises, you place yourself in a controlled environment, giving yourself a training ground where you can continuously practice, train, and put your skills to test without the pressure of losing your hard earn cash. Hopefully, this will help you follow through and fully embrace change, allowing you to grow as a trader.