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Home / Finance / Currency Trading
Trading The Market: Keep It Simple Stupid!
By:James Lee
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. New traders favor technical indicators as it eliminates the need to think on their own. They will plot a dozen indicators on their charts waiting for the perfect signal. 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. Afterall, indicators indicate and produce lagging signals.
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. Apply the concept of auction to the financial markets and learn to read market internals. Look for market imbalance vs balance and price rejection vs price acceptance. Still, trading is a game of probability. But with the proper training, 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. The Holy Grail in trading is to find a trading style that fits you and to understand your pyschological make-up for the game. This can only be done through gaining self knowledge.
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.
Article Source: http://www.dailynewarticles.com
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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