Trading The Market: Keep It Simple Stupid!
It seems like each day there is another complicated trading system in development. I am quite surprised to see the trading population dig into more complex methods combining various indicators to profit from the financial markets. How many confirmations does one need? By the time all your indicators confirm a buy or sell signal, your entry point is towards the end of the price swing. K.I.S.S. Keep it simple stupid! Simple methodologies have been proven to work in the financial markets. There are numerous traders who use a simple breakout strategy, pivot point strategy, or RSI and price divergence. Is there really a need to make trading so complicated when simple systems are proven to work? I have noticed that academics, engineers, and programmers turned traders are often the ones involved in designing complicated systems. Perhaps they are underestimating the simplicity of trading? Trying to incorporate vast information and multiple indicator confirmation signals can lead to analysis paralysis. This can cause a trader to freeze in the moment of action and to hesitate in pulling the trigger. What happens if 4 of your indicators signal a buy and 4 other indicators signal a sell? As a discretionary trader, I try to keep things as simple as possible. What a trader really needs is to understand the language of the markets. The market is like a speechless baby. It is impossible to understand exactly what he is saying but through observation, one can start to get a feel of expression. Still, trading is a game of probability. But with the proper training of market understanding and market internals, a trader can put those odds in his favor. The majority of the trading population refuses to think on their own. Being mentally lazy is deadly in the financial markets. Perhaps this is the reason why people continuously seek for the Holy Grail through indicators and systems. They look in places where there are no answers. The only place they should be looking is in the mirror and in themselves. Trading should be simple. But the simplicity of it comes through hours of hard work and training. Trying to catch the subway in Tokyo, Japan can be disastrous for the first timer. But after living in the city for some time, one should be able to get across with his eyes closed. Good luck, best of trading. James Lee is a full-time day trader specializing in the mini-sized Dow futures. His core trading strategy is based on pivot point clusters and Market Profile. Find out how to identify high probability trading opportunities at http://www.traderslaboratory.com |
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