One of the more common beliefs in any high-performance endeavor is that practice makes perfect.
And why not? The body usually learns to perform actions through repetition. That is, if you repeat a routine often enough, you will become proficient in it and eventually your responses will become automatic.
Thing is, repetition does not always guarantee progress.
You could be doing the same (wrong) things over and over again and still (wrongly) expect better results. Even worse, you could be programming your mind and body to automate BAD habits and make them the foundation of your skills.
Imagine a swimmer being taught that he should only use one arm to execute a backstroke. He could log in hundreds of hours of practice and have an athlete’s mindset but, since he had a poor foundation of knowledge, he’ll likely lose and even sustain injuries in competitions.
Similarly, tons of chart time and taking bajillions of trades won’t do forex traders any good if they haven’t mastered the basics of risk management.
So, how do you know when you’re not running around in circles with your practices? Here are a couple of tips:
1. Start with the core trading skills
Before one becomes a chess master, he/she must first learn the game, understand how chess pieces move and recognize basic openings.For forex traders, this means mastering the basic economic and currency correlations, identifying trends and chart patterns, and knowing the ins and outs of managing risk.
DO NOT TAKE SHORTCUTS WITH THIS PART!
Practice until you can do them in your sleep. These may sound like a lot of topics to master but trust me…these fundamental skills are really necessary to become consistently profitable.
Once you have a solid foundation, then you can work on being creative in your approaches.
2. Test your skills in realistic conditions
The best way to know if you’re practicing good trading habits is to test your methods in an actual trading environment.
For beginners, you can use demo accounts to establish routines in identifying trade opportunities and placing orders. Test them during volatile, quiet, trending, ranging, and changing market conditions. Log the results in a trading journal and identify which habits and processes work for you.
Once you’ve found a process (or two) that works for you, get a live trading account and start taking small, live trades. Get comfortable with the emotional ups and downs of risking real money until you can execute your trading strategies consistently across different trading conditions.
3. Set up a feedback system
You won’t know how well or badly you’re doing until you have evidence of your performance. If you can’t measure it, you can’t manage and improve it. This is where deliberate practice comes in.
Deliberate practice, or actively dissecting, reviewing, and adjusting your trade methods significantly speeds up your learning process. You can even take it a step further and take pointers from trading coaches or fellow forex traders!
If done correctly and consistently, you’ll learn to identify your trading strengths and weaknesses and mindfully work on maximizing the former and minimizing the latter.
Remember that it’s good traders, not good setups that make good trades. Don’t cut corners in establishing your trading foundation.
More importantly, don’t waste time practicing bad trading habits. With technology leveling the playing field, forex traders have to take any edge they can get.