Stop Practicing Bad Trading Habits!
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We all have heard that "Practice makes perfect"! But can we really develop skills to trade like professionals if we practice enough? After all great athletes repeat the same routine over and over again until it becomes an automatic reaction of their bodies.
But what will happen if you are repeating the wrong things? Having poor knowledge and making the same mistakes won't lead you to progress no matter how many hours you spend practising. Developing bad habits early on can cause you big problems in your trading career. An interesting article published recently argued that it is the continuous repetition that causes such bad habits to become deeply rooted. So instead of burying yourself in wrong trading practices here at Trading Education, we sum up a few tips that can get you out of your routine:
1. Start with the basics
Like most things, you can't become a master on a topic without first thoroughly understanding the fundamental principles behind it. What this means with forex is, before you start making large trades and placing large sums of your cash flow, you need to understand the very fundamentals that constitute trading.
This includes things like common trends and chart patterns, currency correlations and general economic trends. You should review these time and time again until you understand how they work. Only then can you start to form strategies and plans on how to properly trade currencies and make stable long-term gains, as opposed to larger, more luck-based one-off wins.
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2. Use virtual funds in a real-world trading environment
The second solid trading habit you should be following is to regularly test your skills in a risk-free but realistic environment. What this means is, instead of making trades with your actual cash flow, you use demo accounts with virtual funds. But don’t worry, these test arenas are anything but straightforward.
In fact, demo accounts will usually allow you to trade live, so there really is no way to know what will happen. Once again, because this is a way of improving your long-term abilities, this isn't something you do once and forget about. To make this a truly great habit, you will need to regularly revisit these demo accounts, especially as market conditions change and you are inexperienced with the market patterns that are currently being displayed.
3. Seek feedback
The nature of forex trading means that it can be a very personal and isolated experience. It’s unlikely you will have someone else with you in the room when you are making your trades or trying to analyse trends. However, this does not mean that seeking feedback should not be a key part of your learning process.
In fact, this one good habit alone could be what sets you apart as a truly successful forex trader. Yes, you should go through and review all of your trades personally and try to offer personal feedback. But what you should also do is seek feedback from some kind of mentor with more experience. This could be from a friend, relative or even a paid coach.
At Trading Education, we also recommend these good habits as a solid and fundamental way to build up a successful career in forex trading. Yes, practice is a vital part of learning, but there is no place for practice without structure or routine. Instead, you should follow these three guiding principles:
- Always go back to basics, to ensure you understand the fundamentals of all kinds of trading patterns.
- Use demo accounts and virtual environments to test your knowledge, especially when markets fluctuate and shift in ways you have not yet seen.
- Seek out a mentor with more experience than you, who can offer you constructive criticism and feedback on your trading patterns.