"The minute you think you have found the key to trading, I promise you the markets will change the lock." - Linda Bradford RaschkeIt is very easy to think that there is a magic set of parameters which will work best in a chosen market.
The problem is that a certain set of parameters, on a particular timeframe, may work well for a specific period of time, in specific market conditions. But as soon as you dare think "Eureka - this is it!", the markets will change character and those parameters will not work as well.
"We have a saying here: "It is incredible how rich you can get by not being perfect." We are not looking for the optimum method; we are looking for the hardiest method. Anyone can sit down and devise a perfect system for the past." - Larry Hite
A trader is always evolving, in terms of his ideas, beliefs and his method. As an example, you often read about how young 'fearless' traders learn to appreciate the importance of risk control - often after blowing up an account or two, or at the minimum having an emotionally demoralising experience associated with a major drawdown. Even some of the Market Wizards went through this.
Occasionally, a trader moves away from their original ideas and beliefs about how to make money. Again, some of the most successful traders have done this.
"We have a saying here: "It is incredible how rich you can get by not being perfect." We are not looking for the optimum method; we are looking for the hardiest method. Anyone can sit down and devise a perfect system for the past." - Larry Hite
As a trend follower, it is important to acknowledge and accept that individual stocks making up the 'stock market' are in a constant state of change themselves, be it trending or non-trending, and all with differing levels of volatility, as well as the indices themselves, along with foreign exchange, interest rates, commodities etc.
When it comes to trading, I like to think differently. I'm not afraid of being a bit of a heretic when it comes to thinking about the markets. While I adopt and use 'classical' trend following and breakout principles, I also like to think for myself, outside the box.
As an example, lots of traders swear by running backtests and tuning their trading models based on the results of their testing and analysis. Certainly, in some cases with getting to grips with a basic concept, backtesting can be of some use.
When traders seek improvement, more often than not they will ADD something to their routine or method of selection, or maybe start putting extra indicators on their charts.
Yet most of the successful traders I've had the good fortune to speak to or correspond with only really hit their straps when they REMOVED the superfluous elements from what they were doing.
They developed an understanding of what were the important elements in achieving profitability. They found simplification and clarification in what they were trying to achieve. They got rid of the extra elements or chart indicators they didn't need.
They used Occam's Razor in their approach to the markets.
Now here's a suggestion. Why don't you take the same approach to your thinking?
"Everything should be made as simple as possible, but not simpler."
The above quote is attributed to Albert Einstein, and it is something I try to adhere to with my own trading. That said, there is a balancing act between keeping things as simple as possible, against striving for improvement which may mean adding complexity to what you are doing.
A trader friend recently told me about a commercial property transaction he was asked to get involved with some years ago. The deal was worth several million pounds, and given the complexity of the deal you would have expected that the people involved concerned would have wanted a detailed reports from the banks or property agents, surveyors, and the local councils, running into many pages, covering all aspects of the potential deal being suggested.
