A Greek philosopher once said that “the only thing that is constant is change.” This adage is never taken for granted in the world of forex trading.
The nature of the industry doesn’t make room for those who are too set on their ways. The market drivers and the popular strategies today may not be what drives price action or what makes pips in the future.Luckily, flexibility is something you can develop over time and with lots of practice.
Of course, being a flexible trader doesn’t mean changing your strategies at the first sign of trouble. It also doesn’t require you to give up your trading personality in favor of a more profitable strategy.
Here are some simple ways to become a more flexible trader:
1. Assess the market environment and adjust
Being flexible could be as simple as correctly assessing the environment that you’re in and using that knowledge to pick the right approach to your trades.A trend-catching system, for example, could be used when a market theme has been dominating for weeks while range trades are best for slow markets.
A flexible trader is able to recognize the signs when it’s time to change biases. Like any good trader, you should be in tune with the markets enough to know when your original ideas have been invalidated.
2. Be adaptable when it comes to risk management
Being adaptable with your risk management practices is also a must. This doesn’t mean betting the farm and gambling your way into profitability. Forex trading is a numbers game after all.
As long as the odds are in your favor, you’re confident in your idea, and you can take the potential hit without losing sleep, then you shouldn’t be afraid to modify your risk parameters once in a while.
3. Update your knowledge
Simple things like staying informed about the average volatility of the pair you’re trading or reading the possible short and long-term impact of a news report could help to alert you of shifting trading conditions.Having more than one strategy or risk management plan in your trading skill set could also help you adapt to market changes.
Consider experimenting with different indicators, currency pairs, and other strategies on both ranging and trending conditions before committing real capital to it.
4. Track your market observations
Using a trading journal, note the strategies that work and those that don’t. It also helps to add your market insights on economic releases and how forex pairs reacted.
While this process won’t guarantee wins on your next trades, it can help you develop that “gut feel” for the markets and spot patterns better next time.
Also, by noting whether a particular strategy would’ve worked or not could help you fine-tune your trading plan and be able to pick which tactics to use during specific market scenarios.
5. Get in touch with other forex traders
Aside from getting tips on where you can get your forex news, talking to other traders also exposes you to different points of view and promotes open-mindedness – something that you definitely need if you want to be able to change your biases on time.
Change is as common in the trading scene as wins and losses and the only way to survive in this industry is to be flexible.