I don’t care if you are swing trading or day trading, you need a simple trading strategy instead of one with too many moving parts.
You know what’s nuts?
Traders who insist they are making money with a swing trading strategy that looks like this:
I don’t know if this is a Picasso or someones attempt at dissecting the markets to find trading opportunities. One thing we can agree in is this does not look like a simple Forex trading strategy and that back testing this mess would be extremely difficult….if not impossible.
What about this?
Any idea what they are trying to exploit in the market? Any idea what their “edge” is? Do you think they have found the “Holy Grail” by having so much information on their chart?
In truth, it does not matter what you and I think about this jumble of technical indicators. That said, there are so many lines and numbers that have nothing to do with current price which points to that information being useless.
The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective. – Warren Buffett
I would put money on that fact that traders that have charts looking like spaghetti, that blocks the movement of price, are not making money on a consistent basis. Why? There is so much going on with the charts how do you quantify how each trading indicator affects the other to improve the edge?
You can’t.
Simple Trading Strategies Really Do Make Money
These charts above look fancy…complex, complicated…and maybe even mysterious. If a newbie Forex trader sees these kinds of charts and trading strategies, he would most likely believe he’s found the holy grail Forex trading strategy.
Seriously!
With all that information and the skill at which the technical analysis is applied, it must work very well!
3 Questions for you:
- Why do some Forex traders always keep looking for that holy grail Forex trading system?
- Why do they always keep looking for the holy grail Forex indicator?
- Why do some Forex traders think that there must be some few elite Forex traders out there that hold a secret Forex trading system or a secret Forex indicator that they don’t know about..
You may have guessed that one reason traders think the Holy Grail exists is because the marketing that is being done…is done very well.
“Ex-Banker Reveals The Hidden Secret For Profits”
Typical marketing B.S.
Some traders think that there is one trading indicator that will change their trading for the better. No. There isn’t one
Indicators are derivatives of price meaning they NEED price in order to calculate. Even volume needs price.
So what should you focus on?
Price. There is a reason why I love price action and this price action trading course is free for you to learn all about that type of trading.
Simple trading strategies work. Buy and sell signals are not the most important variables for successful trading.
I think investment psychology is by far the more important element, followed by risk control, with the least important consideration being the question of where you buy and sell.” – Tom Basso
That’s right. Your setups are not the most important consideration and any one of the free swing trading strategies on this site may be good enough for you.
4 Reasons Complex Trading Systems Are Inferior To Simple Strategies
- A complex system is a difficult system in terms of following the rules…it may have many! And when you are trying to analyse a currency for a trading setup, its may not be easy if you’ve got a very long checklist to follow!
- It breeds frustration and you end up not following the rules of the trading system at all.
- Analysis Paralysis. If you have a Forex trading system that has so many things that you need to do before placing a trade and even if an opportunity comes to take a trade, you don’t take it or you may miss it.
- After a while, you find that you are mentally spent and when you are not making any money at all from using the system, you start to not follow the trading systems rules at all-you start breaking it!
When the human brain has too much to focus on, like the charts above, you can imagine how weary a trader will get.
Don’t be that trader!
FOREX TRADING STRATEGIES THAT WORK ARE?
Here’s something that no matter what you say (which would be a lie!) is always true: the mind works better when its not distracted by too many things.
Therefore, keep keep your Forex trading simple, which means keep your Forex trading charts neat and simple like this:
Use Simple Trading Strategies
Simple trading strategies that focus on price action and perhaps an indicator or two will allow you to focus on the more important aspects of trading as mentioned by Tom Basso above.
Use Swing Trading Strategies
Swing trading allows you to take advantage of strong swings in the market. They are better traded with the overall trend direction and the potential for large profits is always present.
Support And Resistance Is A Simple Trading Concept
The markets are attracted to these levels because that is where resting orders are. If you are able to be consistent with support/resistance location, you may find your trading results improve.
Less Is More
Too many traders have redundant indicators. It is not uncommon to see 2 momentum indicators, 2 trend indicators, as well as calculated levels such as Fibonacci or pivots. That’s not trading price….and remember…only price pays.
But all these are nothing if you fail one thing…risk management.
Even Risk Management Can Be Simple
You can have the best trading strategy but if you do not apply proper risk management in trading, you will not survive.
For example, you have a $5,000 Forex trading account:
- if you risk 2 % each trade then you only need to have 50 losing trades in a row to totally wipe out your forex trading account
- if you risk 10% each trade, you only need to have 10 losing trades in a row and you are out.
- if you risk 20% each trade, that means 5 losing trade in a row and you are busted!
Now, remember this…what we are talking about here is risk per trade.
But suppose you take 5 trades for the day and you risk 5% each trade and all of them turn out losers, you’ve just lost 25% of your account in one day.
So what does this mean to you?
- You’ve got to learn to think in terms of how much you are going to risk per trade
- How many trades your going to take in a day (or week)-you need to set your limit and if you hit that limit, you stop trading…there will be a better time next time.
For example…you made can draw up a risk management plan that looks like this:
- You will risk only 2% per trade
- Your daily risk for the day is 6% ( that means you are allowing only 3 trades each day so 3 losing trades for the day and you stop trading)
- Go a step further and say that you are willing to risk 15% in a week (This means that if you lose 15% of your account during the week, that’s it! You stop and wait for next week to trade with a fresh mind.)
Simple Trading Strategies You Can Use
We have plenty of strategies you can use that are simple and easy to use.
- 50 EMA Swing Trading System
- MACD Crossover Swing Trading System
- 34 EMA With Trendline Break Swing Trading System
That’s just a few you can start digging into. The key is to keep your swing trading strategy simple without too many moving parts.
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