Tuesday, October 05, 2010

The KISS method of trading

I'm an advocate of the KISS method (Keep it simple, stupid!). I do not want to spend hours pouring over economic reports, company balance sheets, or any other form of fundamental data. Similarly, I place no reliance on technical indicators, which are lagging indicators, such as stochastics, RSI and the rest. There is only one piece of information that I look at - price. I used to track volume, but I found that didn't improve my results. So it's price, and price only.

This has many benefits for a trend following trader. This enables you to trade any instrument you wish, be it Google, Crude Oil, Gold, EUR/USD, or anything else you care to name.

From that base, you can construct a series of trading rules, which tell you when to get in and out of a trade. This enables a trader to eliminate any discretionary (i.e. emotional) decisions being taken. Combine this with strict money management rules, and you would end up with a robust trading system.

In my own trading experience, this has proved to be the most reliable, consistent way to make money, and the least stressful.

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