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. Complicated trading strategies and technical analysis, although sometimes psychologically appealing, can be very counterproductive to the bottom line. As in most things in life, simple is truly better when it comes to trading strategies. A KISS trader, therefore, applies the KISS principle to the world of trading and investing.
The acronym K.I.S.S. stands for Keep It Simple Stupid. This acronym is as applicable to the field of forex trading as it is to any other. Keeping it simple in regards to your forex trading means keeping all aspects of your forex trading activity simple from the way you think about price movement to the way you execute your trades. Simplicity is the most often and easily overlooked factor to profiting long term in any financial market.
Many traders think that by trying enough trading systems and forex indicators, eventually they will hit upon that one that is their automatic ticket to consistently profiting in the markets. This belief is exactly what causes many traders to blow out their accounts time and time again only to find themselves full of frustration and confusion. The fact is, that while almost all traders would say they want to make trading a simple process, they are going about it in the totally wrong manner.
The K.I.S.S method, as it relates to forex trading, is built upon an understanding that the best way to navigate the market is by learning to interpret and trade the raw price action signals that form naturally in the market. By trying to force a set of strict indicator based trading rules around the unbounded arena of financial markets, many traders unknowingly make trading infinitely more complicated and difficult than it ever needs to be.
A professional trader is constantly learning and testing new trading techniques. A good lesson is that the more sophisticated the techniques, the worse the results may be. Using complex fundamental analysis, quantitative algorithms, and many varying technical indicators all at once in their trading methods usually ends with the same result - losing money! This is where KISS traders usually have the advantage and the most profitable trades, as they have the ability to spot the simplest trades.