Last updated on April 26th, 2020
At what point has your trading become over-complicated?
Some traders can have many variables in their trading plan and do fine.
Others can get overwhelmed when there are too many things to consider for a trading setup. I’m sure we’ve all felt that way at times.
There is no simple answer because it depends very much on the individual and their capacity.
Even though Occam’s Razor states: “the simplest solution is almost always the best.”, simple for you may mean complicated for me
If you agree that you need to “find simple”, how do you get there for your own trading?
Trade Simple – What Gets In The Way?
There are a myriad of different obstacles to potentially overcome in order to understand what the simplest solution is.
Of course it’s easy to recognize a simple solution which is working well for what it is.
However, in order to come to the simplest solution we often have to try one thing and then another, add a couple of rules or trading indicators here and there or even try out a number of different markets.
At some point everyone reaches the stage where they know their trading methodology has become too much to handle. I’ve walked down that road and it started with Fibonacci ratios and spiraled down from there.
It’s too much work or too complex a trading strategy or there are too many concurrent strategies to be able to trade them all effectively.
An inexperienced trader doesn’t know any better, they will usually try to find a ‘better’ way when something they are doing appears not to work.
It’s really a very natural thing when you think about it.
To become good at something takes learning something new and a bit of practice/experience. Trading is no different from many things which we do and it also benefits from a bit of guidance from successful traders.
But many of us decided to go it alone.
This potentially raises the level of uncertainty a beginner experiences when something isn’t working well as they have nothing to reinforce a sound method. When a beginner learns a method or technique and applies it with little or no success it can be puzzling.
It’s hard to strip away uncertainty when you have nobody to bounce your thoughts off of.
They might add a condition, but when the condition loses them money they question the reliability of the method and start jump to different trading strategies.
This starts the ball rolling on a lot of other issues that can negatively influence trading success.
100% Winning Trading Systems – The Search Continues
This is the beginning of their quest for that “Holy Grail” of trading methods. To try to ensure they don’t miss out on the ‘best’ moves, they might try a number of different products at once.
If the strategy they use does ring up some winners, but it’s not showing a high enough win:loss ratio, then maybe it’s just worth trading different products only when they’re doing something specific.
However, if you’re not at a point where you can trade a strategy consistently in one product, how are you ever going to be able to handle multiple markets?
Over-complication isn’t just the for the trader who’s learning what works and what doesn’t work; it’s an issue for traders who are struggling to ‘make it’.
Although they might start out over-complicating for similar reasons to the newer trader, for a trader who’s been about for a while there are probably other drivers at work.
They may be engaged in self-sabotage without even realizing it.
Some who suffer from this phenomenon wouldn’t even think it could affect them.
Accept Uncertainty. Accept Risk.
By not fully accepting uncertainty and risk in trading you will always experience a degree of pain in certain circumstances, which may well lead to fear, which may well lead to inconsistent results.
It’s in our nature to avoid pain, over-complicating your trading could be an attempt to evade the natural conclusion of taking responsibility for a loss; you are not a good trader.
You are able to look for something that you did not see at the time to “make sure” it can’t happen again instead of either accepting that nothing works all of the time or that you made an inevitable mistake as a human being.
The logic which makes you think that you’re a bad trader is flawed as we know that even the best trading systems have losses, and that the market surprises us time after time when a trade looks like it might be about to stop you out before turning around and driving to its target.
We don’t know whether or not the next trade will end up a winner or a loser, but losing is a natural consequence of trading and does not automatically mean you’ve done anything wrong.
Whatever the reason for over-complication, there comes a time in any trader’s career that it becomes necessary for him or her to address what is needed and useful in order to carry out a trading plan effectively.
Everything else is just noise.