K.I.S.S. has saved me hundreds of thousands of dollars throughout my career. I am not talking about the famous rock band “Kiss,” the Hershey’s chocolate in the silver wrapper, or what you gave your spouse before you left to work this morning. The K.I.S.S. I am referring to is an acronym that stands for, “Keep it simple, stupid.”
I am sure you think that’s an odd quote for me to constantly be reminding myself throughout the day but ever since I have used this mantra in my trading I have stopped losing stupid money.
As a professional trader I am constantly learning and testing new trading techniques. A good lesson I have learned is that the more sophisticated the techniques, the worse my results have been. I have used complex fundamental analysis, quantitative algorithms, and 7 technical indicators at once. Each of these trading methods has ended for me with the same result… losing money.
What I find is that the most profitable trades are those that are the simplest to spot. I enter into these types of trades with confidence and size. Though they might be the simplest in nature, they are the smartest type of trades to make because they produce the greatest profits.
The K.I.S.S. principle states that simplicity should be a key goal in design, and that unnecessary complexity should be avoided.
Over the past 12 years I have taught and mentored many people, from many places, with a variety of trading backgrounds. There is a particular group of students who come to me who are confused, not because they are trading without any education, but because they have been over saturated with technical analysis. These students have read all the books about the famous technical indicators; MACD, stochastics, DMI, RSI, etc., but they’re still not making money.
Just because someone is well read doesn’t mean they understand how to use technical indicators. Nor does it mean that the technical indicators work all of the time.
My first piece of advice to these students is to do what I do: take a piece of paper, write down K.I.S.S., and tape it to their computer monitor. This reminds me it is a stupid idea to make a trade using complex indicators. It’s stupid because my trading history shows me I will lose money.
Hear me clearly; I am not telling you to stop using technical analysis. Everyone should be using technical analysis as long as they understand how to use it. I am a fan of basic, easy to learn technical analysis. However, if you don’t completely understand why you are making a trade, don’t make it! Also, don’t feel the need to trade with every technical indicator. I don’t trade or teach with many indicators but the ones I do have made me and my students loads of money.
“Stupid is as stupid does” said Forrest Gump, a movie character that finds great success in all walks of life, though he is very simpleminded. Let’s take a lesson from Forrest – let’s keep things simple and we will succeed. Let’s not do anything stupid, meaning anything complicated you don’t understand.