Do you change your strategy and how often?

Hi guys!

Hope you're having a good week of trading so far.

Someone had mentioned to me that sometimes, a different market environment requires you to change your trading strategy.

Is this necessarily true? It took me some time to develop my current strategy and I'm still doing forward testing, although sometimes I still give in to the temptation to trade GBP/JPY with it!

Do you change your strategy and if so, how often do you change it?

How do you know what to change?

Many thanks!

I change my strategy when the current one stops working, I define 'not working' as statistically doing no better than random.

Hello Jessa,

Actually I am, thank you. Hope you are as well.

I do agree that certain systems perform better in certain markets. However, about the quote above, this is so much easier said than done. People on this forum, and others around the web, have this horrible problem called "hindsight". I honestly believe it is one of the most destructive traits a person can have when approaching a market ... it gives false hope and prevents innovation. It is quite obvious in many posts, heck, even infomercials insult themselves by using hindsight. Not to bore anyone, but BetterTrades uses a graph of MSFT and some how they magically knew (before it formed) that there would be a 3 year "trench" or what ever you call it. After it was perfectly clear (present day) they then set up two trendlines and sold at the top and bought at the bottom. Yep, that surely didn't work because nobody knew that such a pattern was formed until 1 1/2 years into the 3 year period. If they continued to do that same thing last year they would have sold at the top of the channel and got bitten so hard they would have lost half of what they made going back 2 years, since the discovery of the channel. Anyway, to get back to my point, there is no way to really know when there will be trending and when there will be chop. Now, what to do about it right?

No, it isn't true that different market conditions require you to change your strategy. That is, if it is decent in the beginning. As I already stated above, unless you are a trading mogul ... there is no way you will know what the market will turn to tomorrow anyhow. Right when you say, "okay, this is a choppy market" .. it will breakout and trend for 3 months. Am I being too morose? Perhaps. Instead of changing everything, and this is what I did, zoom the chart out. Phew. It is a breath of fresh air, it really is. Past cases where you are fighting for two weeks to get that good trade going are suddenly just paved right over. It is flat for two weeks, though you don't care one way or another because you have a grander perspective.

I started trading late 2006 actively, first few systems were busts from the start, then about August of last year I started to figure things out. I say started as I am no trading genius. I returned under 10% last year. I am always messing with my overall system, though just a tweek here and there. I run things through a spread sheet and try to find some statistical benefits to do one thing versus another. Though when it comes right down to it, these small changes don't mean much of anything. For most, there will still be a very large amount of market reading and "feel" that goes on. I am quite jealous of those that quantitatively figure everything out. I need to grow a bigger brain before I can do that. Then I will give Citadel a call. I guess to directly answer your question, I changed my system when I realized that I was wearing myself out mentally and physically and there was little hope for progress. I did this at least 4 times in an 8 month span and then slowly started putting pieces together. Having said that, I don't think negative about those 8 months (or more if considering passive trading times), as I discovered what didn't work ... which in retrospect now is very valuable.



It sounds as though you are doing the right things (as I figure right to be). Keep plugging away. Find the spots that give you trouble. If the trouble spots are those two weeks of flat chop with a 150 pip range total, zoom out and find out how you could avoid that whole situation. The alternative to zooming out, if you really want to trade actively, would be to compile data and do statistical studies. I suspect this is what forum members like Craig who replied before I did do as their trading approach. It is tough, something I am still attempting to figure out, though can only chew tiny bites at a time.

I hope this helped a little?

I like G/J. But i started using price action and price patterns a while back and i haven't needed to change it since. I think pure price based method are adaptable by nature anyway though.

Hi Craig, StockKJay, and PipPrincess!

Thanks so much for these thought-provoking comments.

May I just say that what you guys are doing is really great! (jumping up and down on a couch on Oprah great)

This forum is so great!! I really mean it. Every time I come on here to ask questions, everyone is always so willing to help and your willingness to share your insight is really like pips in the pocket.

I wish one of these days, I'd have really great forex trading insight to offer others. In the meantime, thanks so much for helping me learn!!

StockKJay: Your post about hindsight is absolutely valid and the fact that you seem really determined to succeed in the market is really inspiring. Keep up the great work!! I am going to try zooming out.


Craig: I'd actually tried measuring probability at one point. I read in a book recently about someone who actually uses decision trees in planning out their trades. The book didn't detail a lot about this method. It was rather vague about this bit, but I found the concept really fascinating. Do you mind clarifying how you go about measuring probability? If I find out more about this, I'll post it on here as well.

PipPrincess: I like GBP/JPY too, but I think at this stage, I'm just not ready to trade such a complex pair. I'm glad you found your way with it. One day, I may be brave enough to try it again. I wish you much success with it.

Thanks again, guys!!

All the best.