Simplicity! - Trading Lesson Of The Week
Trading is complex. Complexity can be defined as "a whole made up of complicated or interrelated parts" The world of trading is rife with complexity. There are technical concepts to learn, trends to analyze, patterns to spot and qualify, entry signals to heed, position management strategies to follow, stop losses to respect, all the while keeping an eye on the market environment through the analysis of internals. Seems complex enough? Then there's the issue with learning to use a trading platform such as Realtick (provided by www.mastertrader.com), the use of scanning mechanisms, etc, etc. There's complexity everywhere! And traders pile on the complexity by making trading even more complex than it needs to be. Complexity can increase exponentially when we add more "parts" to the whole and here's where traders get frustrated and overwhelmed.
Take any strategy of the ones we teach in the Trading the Pristine Method and Advanced Technical Strategies seminar series. Its complexity will be established by the number of parts that makes up the "whole" system. You have to analyze the trend in place, the "room" to move toward resistance/support, the quality of a given pattern, the risk-reward ratio, then calculate the position size according to your Trading Plan, and after making sure that internals are in alignment (and maybe the sector is also cooperating) you finally can pull the trigger to buy/sell. This in itself is complex enough. Depending on the timeframe you trade (5-min. charts vs. weekly charts) you'll have more or less time to make all these calculations. Now add another strategy, ideally one that requires your attention at the same times of the day when you should be focusing on the first strategy (Notice the ironic tone of voice) Can you feel the complexity creeping in? Your brain has now received a jolt of complexity that's more than double the intrinsic complexity of each strategy! Imagine having to focus on the entry above the 5-minute high on strategy 1 while at the same time needing to deal with an entry on strategy 2 that might be different (But triggering at the same time) This of course is perfectly doable for a seasoned trader who has enough experience and the right training (The Pristine Method of course!) but think of the trader in his developmental stages...
Traders bring unnecessary complexity upon themselves because they feel that the more they attempt to do, the better their results. Nothing could be further from the truth. Most consistent traders I know share the exact opposite trait, they crave simplicity. That's not to say that trading is simple though. It means that their approach is straightforward and lacking unnecessary distractions. Their analysis is objective, their execution is simple in nature, and their focus is on one thing. Do you trade Pristine Buy / Sell Setups? You should find dozens on any given day, and all you really need is to catch 2 or 3 to make your day!
Traders oftentimes look to bring many strategies to their daily activity, simply because they feel like it would help them be ready to capitalize from "more opportunity". What they don't realize is that the excessive complexity they bring with each addition could prove harmful, particularly through their development. Crave simplicity and see the results!
Jeff Yates
Contributing Editor
Interactive Trading Room Moderator
Gap, Intra-Day and Swing Trading Specialist
Instructor and Traders Coach
Pristine.com provides exceptional trading courses, trading seminars, trading DVDs, free daily trading picks, and multiple trading chat rooms to active investors and traders. In addition, learn how you can trade prop firm capital. Visit www.Pristine.com to learn why we are the Worlds Elite Trading School.
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