KISS (Keep it simple stupid) ... but make sure you still have an edge

Discussion in 'Psychology' started by alex.samant, Jun 4, 2007.

  1. One of the oldest adages of Wall Street is KISS (Keep it simple stupid). Another one is that irrespective of your method, psychology and money management are more important.

    The two above are true. However, most of the people, in their ignorance, are not using them at the right time, in the right circumstance.

    Keeping it simple does not mean you should keep it simple to the point that you don't have a technical edge anymore. One thing should be known: the shorter term oriented you get, the more complex and sound the technicalities get. It's one thing to drive a car: you need a speedometer and rpm meter, gearbox, mirrors and off you go. When you are flying a plane (the comparison to day-trading) and everything moves fast, plus you got no concrete below you, you need more. You need an altimeter and a bunch of other very valuable flight tools. You can't keep it simple in a plane, or at least not when you have no experience...

    This is just as with trading. Consider the fact that when you are on an intraday chart, all your indicators should use the (H+L+C)/3 base for the calculation, instead of the classic Close. Why? Because nobody gives a damn what the value was when the 1hour bar closed. This is also leading to the conclusion that indicators that natively take the close into comparison, like the RSI, Stochastic, Williams %R are useless intraday.

    So, you keep it simple conceptually, visually, but underneath, you got a whole army of details set up so that you can be consistent. Charting software that lets you program stuff so you can identify visually, like coloring bars, adjusting indicator calculation and the such is vital.

    This gives you an edge. It's logical to see now, that without these adjustments, on intraday charts, you simply don't have an edge.

    Coming down to the second adage, about psychology and money management being more important than technicals... well... this is completely not true. Some people say that at some point you realize that whatever you use, even a simple moving average system, is good when you consider money management and psychology. At some point you should be concerned about performance. As long as that is on your mind, you should be able to come up with something better and more flexible than a simple moving average system. However, you should be comfortable with what you have. Although some people disregard the Holy Grail concept, there are things that are very close to it. As a performance seeking individual, you should aim at uncovering those grails and then adding sound money management and psychology on top of them.

    Only when you understand these 2 adages and the dangers they pose in the path of your becoming a professional, will you be safely saying that you have an edge.
  2. fubar


    Or you could study Jack Hershey's complicated unprofitable method for 12 months and have just enough money left over to buy the packet of razor blades
  3. Big AAPL

    Big AAPL

    Mr. fubar:

    That...was hilarious