Do You Understand Your Method?

Simple vs Complex 

The more complex a trading system the more chances of finding ways to break rules. That is because complex systems usually have a larger number of rules. And often, the rules themselves are quite difficult to understand. So, complex systems or methods generate more “rules”  in quantity and the more rules you generate the more complex the process. Its a cycle. 

Simplify Simplify Simplify 

as once said by the great Albert Einstein. Because as long as you don’t find a process “being simple” it is probably because, (assuming the method is relatively simple) you don’t yet understand it. So, assuming you understand the method ,and perceive it as simple, chances are that it actually is simple and not just simple for you alone.

Hence simplification is our main objective. Not over simplification but just enough that fits our mental capabilities. Over simplification could be a result of generalisation and that may lead to fallacies.

The Simplest Method

The simplest of technical analysis is looking at the price without many additional indicators. It is performed by “simply” looking at the peaks and troughs of the price. You’d want to find its “obvious” trend direction and perhaps a little information about the “momentum” of the trend. One can find its momentum using a simple oscillator. (eWave or AIMS Wave e.g.). You can use a moving average for trend or even Elliott Wave analysis using our 10s to Elliott Wave Technique.

A Simple Trading Method

However looking at the price itself is more important. It leads to a form of analysis that is “logical” and makes sense. e.g. The most popular and very interesting way of analysis the market is looking at “supply and demand” zones or Support and resistance areas. Here you see price comes to a certain zone of price levels and it keeps bouncing off it.

If done correctly it is often a solid evidence that there is something there. That certain types or orders (whether buy or sell) sort of balance out at those levels and the opposing orders exceeds … If we agree that prices usually trend upwards when the buyers “create a force” in that direction that outweighs the selling “forces” then that means that at any given time if prices trend upwards then the “balance” of forces is shifted towards the up side and vice versa.

So when the price reach those price levels/ a zone of price levels, where it gets stuck. We can infer that perhaps the “supply and demand” forces balance out at those levels. Now this is solid information and it can be used. e.g. if your system generates a buy signal and it happens to be just under a zone of resistance, creating a metaphorical ceiling” then it would be logical to filter that signal and wait and see whether price actually breaks past that “barrier”.

Another form of trading is to simply look for patterns created by a set of indicators. Both are great but your success, longer time consistent success, would depend on your, repeat YOUR ability to remain disciplined. You can only find it easier to be disciplined, on and only, if you fully understand the method. If you fully understand the method, you understand your edge. You know the probabilities of your method. As such it would be ok to say, that you believe in your method. And why shouldn’t you because you have done your back testing, and you know that the data suggest that you have a positive edge.

The Key

The key to success is discipline. And if you are disciplined and the analysis process is not too complex the chances of success increase.

AIMS The Hunt method, is the nectar of 7 years of trading experience on live accounts and interactions with several hundreds of people/traders.  The simpler the method , the slower the method, the more chances of creating “successful” traders. Period.

How to Make things Simpler and Easier

There is no need to make things more difficult than it really needs to be.

“Complex things are simple when you break them down.” ………. Josh Kaufman
This is explained in more detail inside our forum. Its a method taught by Michael Douglas in his book Trading in the Zone. We adapted that concept and call it The T20 Principle. We simplify a trading method and start from there. More on this inside…. 

AIMS Stress Free Trading – http://www.iTradeAIMS.com

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