What It Means to Keep Your Trading Simple

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What It Means to “Keep Your Trading Simple”

You have probably heard it from someone–possibly even me in prior articles–and wanted to punch them in the face for not explaining what they meant. It seems like logical advice: “Keep your trading simple.” But what does it mean? Should I only use one indicator? Should I use no indictors? Should I only buy on a full moon and sell on a new moon? When someone says “Keep it simple” we each tend to think of something slightly different. Setting the record straight, here is how you actually keep it simple.

“Simply” is Following a Set of Action Steps

Each trade must involve a series of a events that occur. Before the trade there is the set-up and the trade trigger. Both must be there, and they must be well defined so you can simply act on what you see when the price hits a trigger level.

So keeping it simply means you have defined a set-up. This is what needs to occur for you to sit up in your chair a little and take notice of the price action. A simple set-up would be a triangle chart pattern. Popular among traders and relatively easy to see, a triangle represents a potential trade (if it is a setup you want to trade) but it isn’t a trade itself.

Something needs to happen to that triangle to turn it from a pretty pattern on your chart to a trade. Most traders use a breakout. I leave that part up to you (plenty of strategy articles on this site).

The point is, to keep it simply, all you need to do is define a set-up–something you watch for which indicates a trade may soon occur–and then establish a trigger level/event which causes you to actually initiate a trade.

Remember, trading an analysis are different things. All sorts of analysis may just distract you from acting based on your setup and trigger.

If you want to keep it simple, define your setup and trigger. It may take some work to find a setup and a strategy that produce a profit, but it must be done. Life is much easier when you can just repeat two steps, instead of trying to invent a strategy with every trade.

Add Another One or Two Steps

You have a set-up you like, and you have a “trigger” which causes you to act and get into the trade. Next you need an exit. With European binary options this will involve understanding your set-up and a trigger. Does you trigger typically result in a very fast move in your direction? If so, then you can choose shorter expiries. Or does the price typically move slowly after your setup and trigger, taking some time to put you in the money? In this case, you’ll need to choose longer expiries.

Write down 1 or 2 guidelines which will help guide your decision making on choosing an expiry.

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This now means you only have three things (maybe four) to think about before making a trade, total.

Before a Trade

We only have three things to think about (for European binary options trading–with traditional markets there may be another step or two for setting stops, setting targets and also determining whether trades can be exited early), so that is keeping it pretty simple. And we only need to think about one at a time.

When you are watching the market and not currently in trades, your only job is to watch for a setup. If you have precisely defined what the setup is you are watching for, you can relax as long as that setup isn’t potentially forming.

If a setup looks like it could form, bring yourself to attention and begin to consider what type of expiry you would choose if this setup turns into a trade. Confirm your decision so that if the price hits your trigger you can act without hesitation.

Simple Plan?

The process of trading, as outlined above, is fairly simple. Focus on a trade setup, isolate a trigger and establish guidelines for how you will exit. Think about one at a time and execute that plan over and over again.

But the setup aspect should also be fairly simple. Having ten indicators on your chart to establish a setup or trade trigger may be overkill. There is too much to watch. So when someone says keep your trading simple, usually they are referring to monitoring only a few inputs.

In forex trading I typically I use no indicators, but occasionally use envelopes as a trigger. Same with futures trades. I have one line on my chart (similar to a moving average) and it acts as a trigger for trades.

A trend needs to exist for me to get into a trade, and I have guidelines for getting out of trades.

So my setup simply involves looking for a trend, and then monitoring the proximity of the price to my line (or watching for something similar to a mini-channel breakout if not using indicators). There are only a couple inputs which create my setup, making it easy to spot and simple to follow.

Final Word

So that is how you keep it simple. Keep your trade setups limited to a couple criteria. Then define what your trade trigger is. Set up a couple guidelines for how you exit trades. In all you only have about 3 to 5 things to think about, and you only need to think about one at a time. That’s how you keep your trading simple.

How to Keep your Trading Simple & Effective (K.I.S.S)

Updated: September 20, 2020

K.I.S.S – Keep it simple stupid!

This is a well known acronym spanning across many industries. It is human nature to try to over-complicate tasks to try gain the competitive edge.

Most traders initially believe that by making their systems increasingly complicated, they’re making positive steps to improve their trading in an attempt to ‘out smart’ the rest of the herd.

All this really achieves is: taking on more workload than necessary, making an analysis more difficult and confusing, and it turns the relatively straight-forward task of making a trading decision into a much more stressful and difficult process.

Today I wanted to share some tips on how you can keep your trading simple and effective.

If you ever feel like you’re losing grip of your trading, do yourself a favor and refer back to this article to give your Forex trading a clean-up.

Don’t Go Crazy with Support & Resistance Levels or Trend lines

This has got to be the quickest way to make a mess of your Forex charts and make interpreting your analysis a nightmare – yet there are a lot of traders still committing this sin.

In our last lesson: 4 Support & Resistance Mistakes That Screw Your Charts Up, we talked about how marking more than a few lines is enough ‘tip the scales’, and make your chart look confusing.

If you’re really struggling with where to mark your levels, ask yourself this question: “If I was only allowed to mark one level on my chart, where would I set it to best highlight my analysis”.

Check out my EURUSD chart below…

I am confident the above chart communicates my analysis clearly, even with just this one level. We could probably extend this a little by marking out the next support level here, but we wouldn’t need to go any further than that.

The ‘one level’ approach can be a very effective way of simplifying the way you mark support and resistance levels. You will often see my Forex charts with only one or two horizontal lines on them.

Always keep your analysis clear and concise for your own benefit. Other traders should be able to take one look at your charts, and understand exactly what you’re trying to communicate.

Ask a fellow trader to check out your charts and get their opinion. They may not be able to read your analysis because they simply don’t understand your system, or your chart just may look like a war zone of data which confuses them, which means it’s likely to confuse you too.

If you can’t remember what level is for what, and you’ve got colored spaghetti all over your chart – it might be time for a ‘detox’. Scrub that chart clean, start again and keep things simple!

Checkpoint

Develop a Daily Trading Routine

Are you a ‘fly by the seat of your pants’ kind of Forex trader?

Don’t just ‘wing it’ when it comes to checking charts – you will benefit from a structured routine.

Introduce the next level of discipline into your trading by taking advantage of the benefits a routine has to offer. A daily trading routine can:

  • Help remove chaos, fragmentation and undisciplined trading behavior – and give you back a sense of control
  • Prevent you from missing profitable trading opportunities
  • Allow you to organize your real life and trading together so they work in harmony, instead of conflicting
  • Help you maintain a healthy trading/life balance so you’re not glued to trading screens any more than necessary

We all know how addictive Forex trading can be, and how easily it is to over-commit yourself to the charts. Staring at price charts for long periods of time is not healthy and it can cause you to do really silly things.

One of the main benefits of a routine is to structure your trading around certain hours and prevent you from wasting time watching price ticking away meaninglessly.

In any good trading system – there are key times when you can check the market for trading opportunities. If your trading system requires you to sit in front of the chart endlessly, burn it and move on.

As a price action trader, the key times for me are

  • The New York Close
  • Around the London Open

Here in Australia – we’re kind of at a geographically strategic place for Forex trading. The New York close occurs in the morning, and the London open is in the late afternoon.

So, the first thing I do is get up, do my morning things and get ready to check the markets at the New York close for any end of day signals. Then I have all day to do any other tasks I set out for myself, until it is time for the London open in the afternoon.

At the London open – I re-scan the markets to observe what occurred during the Asia session. I am particularity on the look out for any Asia breakout traps which may present good trading opportunities as the market moves into the busier trading sessions of London and New York. I can set up any pending orders and let the market carry on with it’s thing, while I carry on with mine.

Below is an example of the Asia failed breakout in formation, and generally what I am looking out towards the end of the Asia session…

The screen shot above was taken just around London open. Because there was a failed breakout during Asia, I am anticipating the market will push down going into the London/Us session. Keeping it real simple!

The market did just that, and this is a common strategy I use everyday in the markets and one you can learn more about in the War Room.

I don’t really have to be at the charts at any other time. Some War Room members like to trade the 4 hour charts, so they could set their alarms every 4 hours between a set period to check in with the market and scan for any 4 hour price action signals.

Traders will develop a strong urge to intervene with open positions if they are sitting there staring at them for prolonged periods of time. There is nothing more stressful than watching an open position while it is ticking into the negative. Some traders let their emotions get the better of them and ‘cut their losses’ by exiting early, only to find that price later reversed and hit the original profit target.

If you committed yourself to a structured routine, you would instead check back in with the markets at your designated time to see a trade that closed in profit – noticing that it dipped into the negative before hitting target but being unaffected emotionally because your trade was successful.

See the difference here? You could sit at the screen and allow the natural movements of the market churn your stomach, or just me back later and see how everything unfolded.

Don’t be one of those traders who ‘babysits’ their positions and becomes the ‘OCD micro-manager‘. Set your trades up, walk away, go back to your life and let your trades unfold in a natural way.

How do you determine when it is most important to check your charts? Develop a routine that will work for you and stick to it.

Your will be surprised what you can achieve – most ‘full-time’ traders still maintain a day-job, study full-time, or are full-time stay-at-home parents. Many War Room traders have developed a routine which allows them to trade effectively around their day-to-day obligations and you can too.

Checkpoint

Cut back on all the ‘non-essentials’

As humans we are naturally innovative and are always looking to improve on what we build.

The counter-intuitive nature of the market conflicts with the way we are programmed to function in our day-to-day lives.

With Forex trading, simplicity can be the ultimate level of sophistication and provide much better results than a system which has been extended to use more data and variables.

It’s really important that you know your limits and you don’t make Forex trading so mentally taxing for yourself.

At first, adding lots of indicators onto your chart for ‘extra confirmation’ may seem like a really good idea, but most will agree it does short, and long term damage.

A minority of traders will say boosting up your chart with indicators is a good ‘filtering’ method for screening out bad trades.

In reality, all this achieves is an overload of information – and results that conflicts with one another! A typical situation you will run into when dealing with multiple indicators is:

  • Indicator A says buy
  • Indicator B tells you to sell
  • Indicator C is saying you should stay out of the market.

A price chart shouldn’t be hard to read or interpret. But all the ‘extras’ will give you a sense of mental fog. The essential data lies in the price movement itself.

Candlesticks for example, give you 4 points of important data – the high, low, open and close price. With this simple set of data you can tell a lot about what’s going on with a chart and anticipate future price moves.

Using the 4 data points of a candle above, we can identify simple ‘buy’ and ‘sell’ signals. The chart above illustrates a candlestick sell signal called the Rejection Candle Reversal pattern.

A rejection candle is the most common occurring candlestick reversal signal in the markets. In the example above, the candle shows the trader that the market rejected higher prices during that trading session – closing way off it’s highs.

The closing price for the day was also lower than the opening price, which is another bearish clue. Adding to this further, the rejection candle high price also created a new swing high in the market – this tells us the market is stepping downward with the overall bearish pressure, another bearish clue.

Using these 4 points of data we identified a common candlestick sell signal, and performed some simple market analysis which gave trades that ‘early warning’ hint that the market was about to sell off.

There are many other candlestick signals like this one which are derived from the 4 data points of the common candlestick.

The point is, you don’t need all the extras loaded onto your chart to be able to do great market-analysis or confident trading decisions. Keep things simple, start by stripping back your chart and eliminating the non-essentials to enjoy better clarity and sanity with your Forex trading.

Checkpoint

Learn a Strategy that will Keep your Trading Simple

If you’re following a complicated strategy that involves heavy math, a lot of indicators or long hours in front of the screen – you’re going to have a difficult time finding ‘peace’ with your trading.

You need to be clear with yourself about what you want your strategy to do for you. Do you want your strategy to confuse the hell out of you, or provide you a clear and concise way of reading the markets and the means of making a trading decision without all the stress.

You as the trader must enjoy using the strategy you dedicate yourself to, so you stick with it. Choose a lean trading system with less ‘moving parts’, so that you can maintain the K.I.S.S principle with ease (keep it simple stupid).

The one trading methodology I’ve found peace with is price action trading. It’s the most simplistic, and purest method of trading the markets. As I’ve demonstrated in the article already, you can do some really awesome market analysis and anticipate some really profitable price moves by reading the candlesticks – which is the core principle of price action trading.

The best part is that it’s easy to do!

I know that most traders don’t find their ‘place’ in the market until they learn how to read the charts with the price action trading methodology. I hear this first hand every day! I have many testimonials from War Room traders saying they have only started seeing profitability now and wish they found out about price action strategies years ago – you can check them out for yourself.

You’ve seen some of the price action examples I’ve given here today. If you think those charts were really cool and you want to get involved in trading with price action, check out the War Room for serious traders – it contains the most comprehensive price action course online. The price action protocol course is something I am very proud of.

If you take anything away from this article, I hope that it is this: simplicity works best in Forex!

Good luck on the charts and don’t forget to leave a comment below.

Keep Your Day Trading Simple: Here’s How to Do It

It is logical advice, but is rarely explained

Andrew Brookes/Cultura/Getty Images

“Keep your (day) trading simple.” It’s logical advice, yet rarely does the one saying it explains how to keep it simple. With thousands of articles, indicators, strategies, and traders all saying something different, how do you reduce it all down to the bare minimum and keep it simple? Keeping your trading simple means following three steps, on every single trade. and only focusing on one step at a time.

3 Simple Steps

The Setup

To be an effective trader you need a trade setup. In a sea of ever-changing conditions, you need to filter out all the non-relevant information on your chart. A setup is a precise set of conditions which must materialize to indicate a trade could happen. Every trader’s setup(s) will be different; say for example you only trade breakouts from triangle patterns in the first two hours of the trading day, or in the first hour after lunch.

The triangle is your trade setup. When a triangle appears, it lets you know a trade could be imminent. Until the triangle appears though, you’re relaxed and focusing on nothing but finding triangle chart patterns.

By having a setup, you keep your trading simple. You aren’t concerned about whether the price falls, rallies, or what the news is saying. Until a triangle pattern appears (or whatever your specific trade setup is) you have nothing much to think about.

Until the setup occurs, you can’t advance to the trade trigger.

The Trade Trigger

The best trade setups let you know in advance (at least slightly) what your entry point will be. Once a triangle chart pattern appears you know that your entry will occur when the price breaks out of the triangle (if that’s your trade trigger). A trade trigger is an event that occurs following a trade setup that lets you know it’s time to enter a trade, NOW. If using an indicator, the trade trigger could be the exact moment the indicator passes through a particular level or crosses another indicator line.

Once step one has occurred, and you have valid trade setup, you no longer question whether you have a valid trade setup, this was already decided. Once you’ve identified a trade setup, your only task is to isolate where/when the trade trigger is.

Risk/Reward Assessment

A setup has occurred, and you defined exactly where/when you will enter the trade. During each stage there’s nothing else to think about–in the first stage you watch for setups, that is it; in the second stage, you define your entry point. With a setup in place, and a trade trigger pending, your next step is to determine if you take the trade or not.

If the potential reward based on the setup (and your research and testing) outweighs the risk, execute the trade when the trade trigger occurs. If the potential reward doesn’t outweigh the risk, move back to step one and start looking for another setup.

Being aware of economic or company specific news events is part of the risk/reward assessment. Since we can’t know in advance how the market will react to an economic release, avoid taking (or being in) trades three minutes before or after a high impact economic/company-specific data release. Check an economic-calender before the trading day begins, so you know the data release times. Block off those times on your charts, so you know not to take trades, leaving you to focus on each stage as it comes.

Considerations and Final Word

At any given moment during the trading day, there’s only one thing you’re thinking about, and that one thing is dependent on which step you are on. All other information is irrelevant. First, only focus on finding your trade setup(s). Once you’ve found a trade setup, only focus on finding where the trade trigger is. Once you know the trade trigger, you can determine where your stop loss order and profit target will go. Based on the stop and target (and/or the win rate of the strategy) focus on whether you’ll take the trade when the trade trigger occurs. If the trade makes sense, execute the trade at the trade trigger. If the trade doesn’t make sense, move back to step one.

It is how you keep your trading simple in real-time. It requires that you’ve done your homework though. You need to have defined a trade setup, determined what a respectable risk/reward ratio is (and how you will establish your risk and reward) and it also means you have isolated a precise event which tells you when to get into trades.

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