Saw this piece and thought I'd post it here. (For whatever reason, the link does not post. It is in Medium.com, and was written by WildBuyTheDip. Whatever.) In the world of trading, complexity can be a trap. Many aspiring traders are drawn to intricate strategies, believing that sophistication equates to success. However, seasoned traders know that the path to profitable trading often begins with simplicity. The mantra: "Successful traders have the simplest trading systems" Tings true, and it’s a principle worth exploring. The Myth of Complexity In the quest for trading success, it's easy to fall into the complexity trap. Elaborate indicators, intricate algorithms, and convoluted strategies can seem alluring. They promise the potential for greater profits and market dominance. Yet, the reality is often quite different. Complex systems tend to suffer from a lack of clarity and robustness, making them challenging to execute effectively. The Power of Simplicity Successful traders embrace simplicity in their trading systems for several reasons: 1. Clarity: Simple systems are easier to understand, allowing traders to make informed decisions based on a clear understanding of their strategy. 2. Consistency: Complexity introduces variables that can lead to inconsistency. Simplicity fosters consistent execution, reducing the impact of emotional decisions. 3. Adaptability: Simple systems are more adaptable to changing market conditions. Traders can make necessary adjustments quickly. 4. Discipline: Simplicity encourages discipline. With fewer moving parts, traders can stick to their strategy without second-guessing themselves. 5. Experience Matters: Experienced traders recognize that the difference between success and failure lies in their execution, not the complexity of their system. Execution Is Key The crux of this principle is that successful trading relies on execution. A simple system, well-executed, can outperform a sophisticated one with erratic execution. Experience plays a pivotal role in understanding when to enter and exit trades, manage risk, and adapt to market shifts. Trading mentors often emphasize the importance of honing execution skills, as this is where many traders falter. Discipline, emotional control, and the ability to stick with a strategy through both winning and losing streaks are what set successful traders apart. Conclusion In the realm of trading, the adage "Successful traders have the simplest trading systems" should not be dismissed as mere simplicity. It's a reminder that clarity, consistency, adaptability, and disciplined execution are the keys to success. Experience plays a significant role in mastering these elements, making it a valuable asset for traders. In a world where complexity can cloud judgment, the simple path to trading success is a beacon of hope. Traders who embrace this wisdom are better equipped to navigate the markets and build a track record of profitability. Remember, it's not about how complicated your strategy is; it's about how effectively you execute it.
The reason I posted the article is because it dovetails nicely with a piece posted here a while back by someone else, titled Lessons From The Trading Greats, Volume 1. What I found compelling was in the section on PTJ, where the author notes that the evolution of a trader follows the progression of moving from simplicity to complexity to informed simplicity. "The goal is to build up your knowledge base, find what works, and strip yourself of what doesn’t. Da Vinci was right when he said “simplicity is the ultimate sophistication.” Many traders hide their ignorance with complex models, indicators, and theories filled with big words but of little value." I'm not suggesting that this necessarily applies to everyone, but over time I have found it to be the case in my own (simple) trading.
I’m far from convinced by this point. I haven’t thought about it in great detail, admittedly, but instinctively I think, if anthing, that complex systems are probably more adaptable, in principle, to changing conditions. I think most engineers and physicists would probably agree with this perspective, too?
Okay, per Maxwell Smart, "Would you believe as simple as possible but no simpler?" Informed simplicity, as noted in my second post.
Simplicity tends to be more resilient to variability, whereas complexity often proves fragile—think of the risks of over-optimization or overfitting. Complex systems may outperform simple ones in specific, narrowly defined conditions, but simplicity is generally more adaptable and better equipped to handle a wider range of uncertainties. Some points that support the idea: Simplicity and Robustness: Simple systems tend to be more robust because they have fewer parts that can fail and fewer dependencies. They are less likely to break down when exposed to unpredictable conditions or variability. For example, simple mechanical devices often outlast complex ones due to their ease of maintenance and lower chances of failure. Complexity and Fragility: Complex systems, while often optimized for a specific purpose, can become fragile when confronted with conditions outside their design parameters. This is especially true when over-optimization or overfitting is involved. For instance, in machine learning, models that are overfitted to training data can fail dramatically when introduced to new, unseen data. Trade-off: Complexity can indeed outperform simplicity in very specific, controlled situations where the system is finely tuned. A highly optimized financial model might deliver superior returns under certain market conditions, but it is also more prone to failure during unexpected events, such as a market crash. Flexibility and Adaptability: Simple systems are often more adaptable because they aren’t rigidly designed around narrow assumptions. For example, evolution often favors simpler organisms in fluctuating environments because they can adapt more easily to changing conditions. That said, it's important to note that not all complexity is bad—complex systems can still be robust if they are designed with the right kind of flexibility and redundancy in mind, such as the internet or biological ecosystems. However, without proper design, complexity tends to introduce more points of failure.
I tend to agree with you. Consider an off-the-rack suit. For a given size, it is intended to fit a fair number of similar but not identical body types reasonably well. It is a simpler, and more general cut than a bespoke suit. However, a bespoke suit is a more complicated proposition and is intended to fit only one person very well.
Exactly. One person and sometimes only once. Think about a guy losing weight for his wedding just to fit within his newly tailored suit then gaining all of it back. When we could just fit within a cardboard. Would be much simpler and fit most morphologies.
I suppose the book in this thread takes the simplicity route a bit too far: https://www.elitetrader.com/et/thre...ward-allen-toppels-zen-in-the-markets.380945/ But I like to read it every now and then just to make sure I'm not carrying any unnecessary fat.
Yeah, but it's not much of a chick magnet. On the plus side, it can also serve as living quarters for the residentially challenged. But it's a seasonal thing.