The level at which trading becomes over-complicated is certainly the subject of debate. It depends very much on the individual and their capacity.
You know, when people say the simplest solutions are often the best, I have to smile a little bit. They are absolutely correct in my opinion although some might disagree. Yet coming to the simplest solution is usually far from simple.
Obstacles To Trading Simplicity
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.
But at some point everyone reaches the stage where they know their trading methodology has become too much to handle.
It’s too much work or too complex a strategy or there are too many concurrent strategies to be able to trade them all effectively. Because 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.
In most endeavors we have and will come across in life, to become good at something takes learning something new and a bit of practice/experience.
Trading is no different of course from many things which we do in this way as it also benefits from a little bit of tutelage and yet for some reason many still choose 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.
They might add a condition, but when the condition loses them money they question the reliability of the method and move on to something new. This starts the ball rolling on a lot of other issues that can negatively influence trading success.
Guaranteed Trading Methods
This is the beginning of their quest for that fabled “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 register 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, right?
Of course! I definitely agree.
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?
Additionally, over-complication isn’t just the reserve of 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. By doing so, they may well be engaged in self-sabotage without even realizing it. I know this may seem odd.
Some who suffer from this phenomenon wouldn’t even think it could affect them. “Who, me?” I can hear them saying as I type this.
But think of this…..
By not fully accepting the nature of 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.
By virtue of this and the fact that it’s in our nature to avoid pain, over-complicating your trading could be an attempt in some cases 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 a fairly inevitable mistake as a human being.
Of course, the logic which makes you think that you’re a bad trader is slightly flawed as we know that even the best trading systems have losses, even losing streaks for that matter and that the market surprises us time after time when a trade looks like it might be about to bite the dust before turning around and arrowing 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.
“Simplicity is the ultimate sophistication” – Leonardo da Vinci.
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.
There’s only one true way I know of to lift the curse; self-recognition.
For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.