What Forrest Gump Can Teach You About Trading

Posted in: Basic Trading Strategies, Trading Article, trading videos


simple trading strategyIf the trade plans of some people were assembly instructions, I guarantee that most things would never fit correctly.

Simple trading is overlooked.

Easy access to squawk boxes, news releases, indicators, forums and anything trading related, has resulted in information overload that is not productive.

Trading decisions are made only after consulting every indicator and even the phases of the moon (no, I am not kidding).

If a lot of information is what is required for successful trading, then with what is available, the number of flame outs should not be as high.

Ever hear of a trading toolbox?

That is where people amass so much information about trading methods, trading systems and indicators that they say it’s just another tool in the box that they can use.  Well, that box can cause more harm than good.

I know this from experience.

My charts used to use a variety of moving averages.  They were supposed to help me define trend, strength of trend, risk profile and a host of other things that I thought were required.  Only when all the variables lined up according to the trade plan, was I supposed to enter a trade and, depending on the situation, exit the trade.

The fact is that more times than not, I didn’t really use much of anything they told me.  I cracked open a few of the trading videos I made, checked trade logs and old printed out charts but the moving averages carried no weight on the majority of trades.

Obviously if my plan called for moving average trading setups then they would be useful.  But they were not the basis for the system.

Trading Simple With Information Delete

A quick delete and my screen was no longer cluttered with information that was not used in my trading decisions.  My trade plan was amended after I did a total review of past trades and then went cold turkey on information overload.

A simple Forex strategy was the result.

Isn’t trading supposed to be simple?

If I believe trading is simple, I should approach it as such.

The act of trading is simple but many people add so much detail that they treat it like heart surgery.  The problem is that many of the details has no bearing on the majority of their trading.  It adds confusion and if they treat the information on a casual basis instead of using it consistently, it may keep them out of some great trading.

Being inconsistent in the decision making process does not pave a path to eventual success.

Simple trading strategies can work just as well as those that are more involved.  Perhaps even better!

You don’t want to be inconsistent in trading.  Ever.

If you have approached trading as a professional, you have a trade plan on your desk.

Open it. 

Go through each decision making variable and ask yourself if you truly use that information.  Is that information a “make or break” on a trade.

Now, open up your trade log (which I hope you have.  No?  This free download is a good start.).  Did you really use all that information to take a trade?  I mean “make or break” the trade from start to finish?

Here is an example:

  1. The moving averages are lined up in the buy position
  2. The candle pattern is a reversal from a correction
  3. The Stochastic is overbought but I need it to be oversold for longs
  4. Price is about to break the reversal candle to trigger the trade and it’s a huge pin bar
  5. I’ll ignore the overbought condition and take the trade

There is no reason to have the Stochastic indicator on your chart if you just ignored what it told you.

Simplify the variables you must address before taking a trade down to the bare essentials.  There is a lot to be said for trading simple and for being consistent in everything you do.

I am sure that after completing this exercise, you will find something you can take away from your trading rules.

Simple trading has many benefits including having you trade more relaxed which could lead to becoming more profitable overall.

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Trader at Netpicks
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.

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