Why do we make things more difficult than they are?
Supply, demand and the trend, be it a 5 minute time frame or weekly, its all the same and thats all that matters. Why make things any more complicated? and why does it take so long to realise it?!!!!
Absolutely !
All you need to make a fortune trading is to do what any kid in kindergarten could do, grab a chart, eyeball where the path of least resistance is, jump on board, cut your losses when and as they occur, and otherwise ride that trend all the way until it bends.
Kenneth Grant, in
"Trading Risk: Enhanced Profitability through Risk Control", depicts his experience as risk manager for some of the best and most successful hedge funds, amongst others Paul Tudor Jones funds and
Steve Cohens SAC Capital, that:
"ACROSS ALL TRADING STYLES, TIME FRAMES, MARKET CONDITIONS AND TRADERS, ONE RULE HOLDS TRUE:
10% OF ALL TRADES INEVITABLY ACCOUNT FOR 90% OF PROFITS !"
It is totally OK to lose as a trader, it is just a cost of doing business !
Trading - like most things in life - is simple enough once you succeed in seperating the chaff from the wheat, the
noise from the few, truly
success relevant factors.
It's almost always lack of understanding or ego that leads to complex, inferior problem solving.
Lack of understanding explains itself.
Ego driven efforts at problem solving make you want to be
right over wanting to be
successful.
I always run away very quickly when people aren't able to explain in a few words what constitutes the relevant essence of what they are on about, what the
20% of their effort that generates 80% of their results is.
Jack Welch) said it, and he "dun" it,
Business is simple, undue complexity is almost always an attempt to camouflage lack of true understanding,
or an attempt to hoodwink some gullible souls into believing that they're about to be granted the incredible
privilege of forking over loads of their hard earned money to purchase the Holy Grail. ;-)
Many people who are severely lacking in the wisdom department demonstrate great skills at in-depth analysis of individual trees while failing with great aplomb to even
realise, let alone
see, that there is an entire forest out there.
The definition of what an
Idiote Savante is, in other words.
There is a rather well known complexity experiment that Harvard did where two groups of students had to come up with explanations to simple problems. The first group got the correct evaluation from the professors, ie if they had come up with the correct explanation they received a "correct", if not they got a "wrong", while the second group got
random evaluations, so that even if they were right they might have received a "wrong" and vice versa.
The first groups solutions were all admirably simple, while the second groups explanations became increasingly complex as they tried desperately to force the inexplicable facts to fit the theory.
The same goes for trading.
As William of Ockham very rightly observed in what came to be known as Occams Razor,
"All other things being equal, the simplest solution is the best."
All other things in trading are very equal, and you'll make more money than you can ever spend by being right no more than 30% of the time provided your winners average out at 3 times the size of your losers.
Bill Lipshutz who was featured in the "New Market Wizards" was for his 8 years at the then Salomon Brothers their biggest and most profitable FX trader, earning, on average, US$ 250 K / day for his employer, before he started his own hedge fund, and the way he did that was by going for excellent risk / reward levels where he was right no more than 20 -30 % of the time, but by vigorously cutting his losses short while letting his gains run.
As in the Harvard experiment in trading you can do the right thing and still end up with a losing trade, I suspect unpredictable markets and uncertainty coupled with an absolute unwillingness or even incabability to accept that losing is just a cost of doing business as a trader is what throws most people off track to a degree that they never end up becoming net profitable.
