Why are we afraid of simplicity? | Page 3 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Simplicity is the ultimate form of sophistication ( Elite ) 866 replies

Daily Scalping the Asian High and Asian Low 2 - You want simplicity? 184 replies

Signals for Simplicity 1,144 replies

Elite's Simplicity: Cognitive Process of Technical Analysis (The holy enlightenment) 21 replies

The Journal of Simplicity Trade 12 replies

Attachments: Why are we afraid of simplicity?
Exit Attachments

Why are we afraid of simplicity?

  • #41
  • Dec 7, 2007 8:44pm Dec 7, 2007 8:44pm
I love some of the responses on this thread.

"Yes simplicity is GREAT, which is why I only use <insert indicator name> and <insert indicator name> and <insert indicator name>, and maybe a little <insert indicator name> and only sometimes <insert indicator name>. But I reserve <insert indicator name> for really special situations, where I also use <insert indicator name> as confirmation. Nothing else, really. Keep it simple, ya know."

PS: I do not agree that it is simplicity or the lack of it that makes you wrong or right. You are thinking along the wrong lines. Success in predictions on an unknown time series function (which is really what we are doing) has nothing to do with simplicity itself. And if you think vegas is simple with his method or that price action identification is "simple", you have not understood them.
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
  • #42
  • Dec 7, 2007 9:27pm Dec 7, 2007 9:27pm
Quoting kiwi_trader
Aldente,

1. How long have you been trading?
2. What timeframe (x mins, hourly, daily etc)?
3. How long have you been trading for a living?

I ask because I think that simplification (by removal of redundancy and by being able to read price better) is evolutionary and I'm curious to know where you are on the path.
I've been trading for 2.5 years....went live too early. I've lost a lot of money(by anyone's standards), but I've also made a bit of money as well over those 2 years. No I'm not a professional trader, but I'm also not a newbie. I'd like to think of myself as a journeyman trader.

I agree that removal of redundancy is an evolutionary thing, but I think I'm past most of that(at least I'd like to think so). After a certain point, once the obvious redundancies have been removed, it becomes more a matter of personal taste, and fine tuning whatever tools you have chosen to work with. I think that OVERsimplification can be a danger as well.

As one earlier poster said, its not about what you HAVE or dont have on your charts, its about what the things that ARE on your chart, tell you. If "price action" tells you everything you need to know, then by all means, run with it.

Trading is an evolution of perception, not chart setups. If indicators help you "see" the market more clearly, then use them and try to evolve your perception through them, but I dont think "getting naked" necessarily needs to be a goal, nor do I think indicators are a "crutch", just a different tool to use.

The indicators I use address all the elements of chart reading that I think are essential, no more, but NO LESS either.
  • #43
  • Dec 7, 2007 9:52pm Dec 7, 2007 9:52pm
Insightful post, thanks! One reason why people complicate things is because they believe that it's not easy to earn lots of money and in order to do so, they should be the top in their leagues. More often than not, the type of system you follow and the indicators you may be used to prove your intelligence. Afterall, an artist which uses more tools will be seen differently from one who only knows how to use a pencil! Weird analogy, hope to learn more from more replies
  • #44
  • Dec 7, 2007 10:31pm Dec 7, 2007 10:31pm
Quoting Aldente
I've been trading for 2.5 years....went live too early. I've lost a lot of money(by anyone's standards), but I've also made a bit of money as well over those 2 years. No I'm not a professional trader, but I'm also not a newbie. I'd like to think of myself as a journeyman trader.

I agree that removal of redundancy is an evolutionary thing, but I think I'm past most of that(at least I'd like to think so). After a certain point, once the obvious redundancies have been removed, it becomes more a matter of personal taste, and fine tuning whatever tools you have chosen to work with. I think that OVERsimplification can be a danger as well.

As one earlier poster said, its not about what you HAVE or dont have on your charts, its about what the things that ARE on your chart, tell you. If "price action" tells you everything you need to know, then by all means, run with it.

Trading is an evolution of perception, not chart setups. If indicators help you "see" the market more clearly, then use them and try to evolve your perception through them, but I dont think "getting naked" necessarily needs to be a goal, nor do I think indicators are a "crutch", just a different tool to use.

The indicators I use address all the elements of chart reading that I think are essential, no more, but NO LESS either.
Interesting.

OK. Mine are 10 years. Mainly minutes (started in daily). Six years for a living.

My indicators were two emas on each chart and a cci on my entry chart for divergence but the cci went when I hadn't looked at it for 6 months because I could see the divergence anyway. Probably two years since any other indicator has lasted more than a week. Don't have volume either. EMAs are tuned to offer a view of support for pullbacks.

What indicators have you still got and what do they do for you?
  • #45
  • Dec 7, 2007 11:34pm Dec 7, 2007 11:34pm
Different methods work at different times. It not so much of how to trade based on certain indicators, but when NOT to trade based on certain market conditions. There is no one full proof method, so keeping it simple is not an option when you look at the problem comprehensibly.
  • #46
  • Dec 8, 2007 12:20am Dec 8, 2007 12:20am
Quoting kiwi_trader
Interesting.

OK. Mine are 10 years. Mainly minutes (started in daily). Six years for a living.

My indicators were two emas on each chart and a cci on my entry chart for divergence but the cci went when I hadn't looked at it for 6 months because I could see the divergence anyway. Probably two years since any other indicator has lasted more than a week. Don't have volume either. EMAs are tuned to offer a view of support for pullbacks.

What indicators have you still got and what do they do for you?
Still got? You make it sound like a process of elimination.


I also use CCI and 2 ma's, and a few others.

CCI- trend identification and divergence
2 SMA's - S&R, like you primarily as support for pullbacks
A combination of bollinger bands and RSI - entries and exits
An S&R indicator based on previous ranges - S&R, mainly for breakouts, sometimes as TP levels
ZigZag - to help identify higher lows and lower highs, for potential reversals


Now, do I absolutely need a zigzag indicator to see higher lows and lower highs? Nope, I can spot those without an indicator, but the point is, they help me see them, a little more clearly, and thats all that matters to me. Its just a tool, that helps me.

If I ever reach a point where I just stop looking at them, then yeah, I'll probably get rid of them.
  • #47
  • Edited 1:27am Dec 8, 2007 12:58am | Edited 1:27am
Quoting Aldente
Still got? You make it sound like a process of elimination.


I also use CCI and 2 ma's, and a few others.

CCI- trend identification and divergence
2 SMA's - S&R, like you primarily as support for pullbacks
A combination of bollinger bands and RSI - entries and exits
An S&R indicator based on previous ranges - S&R, mainly for breakouts, sometimes as TP levels
ZigZag - to help identify higher lows and lower highs, for potential reversals


Now, do I absolutely need a zigzag indicator to see higher lows and lower highs? Nope, I can spot those without an indicator, but the point is, they help me see them, a little more clearly, and thats all that matters to me. Its just a tool, that helps me.

If I ever reach a point where I just stop looking at them, then yeah, I'll probably get rid of them.

LOL. You are on to it .... "still got"

You might also get rid of the zig-zag because it (1) obscures the price slightly and (2) means you don't see price movement as clearly.

You might also get rid of the cci because (1) you realise you can see the divergence (loss of momentum) without it so why have it and (2) the mas bollingers and higher highs and lows tell you more than enough about trends.

Perhaps the bollingers because you can see when price is making a big excursion away from the mas (or a trendline or a channel or your visual estimation of the linear regression)

And so it will go. I only wish I'd chased a price only guru early on and removed some steps in the path.

Still can't quite wean myself off the mas, they really do seem to offer a different perspective on support ... maybe there really are a lot of other traders also watching them.

Best of luck.



By way of explanation I attach two charts from Friday. The first is a futures chart and its all thats required to profit from the contract. The second is a currency chart. I include 1 hour and 4 hour background "bars" on this one because I believe that a lot of forex traders use these timescales so its interesting to watch how price behaves on breaking these bars and then react to it. Also I record yesterdays high and low (grey lines) and todays progressive highs and lows again so that I can see what price does after it breaks above or below them. These might in a sense count as extra indicators but I started putting them in just to reduce the number of charts by two.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: futures.png Size: 9 KB
Click to Enlarge Name: currencies.png Size: 19 KB
  • #48
  • Dec 8, 2007 2:09am Dec 8, 2007 2:09am
Quoting kiwi_trader
LOL. You are on to it .... "still got"

You might also get rid of the zig-zag because it (1) obscures the price slightly and (2) means you don't see price movement as clearly.

You might also get rid of the cci because (1) you realise you can see the divergence (loss of momentum) without it so why have it and (2) the mas bollingers and higher highs and lows tell you more than enough about trends.

Perhaps the bollingers because you can see when price is making a big excursion away from the mas (or a trendline or a channel or your visual estimation of the linear regression)

And so it will go. I only wish I'd chased a price only guru early on and removed some steps in the path.

Still can't quite wean myself off the mas, they really do seem to offer a different perspective on support ... maybe there really are a lot of other traders also watching them.

Best of luck.



By way of explanation I attach two charts from Friday. The first is a futures chart and its all thats required to profit from the contract. The second is a currency chart. I include 1 hour and 4 hour background "bars" on this one because I believe that a lot of forex traders use these timescales so its interesting to watch how price behaves on breaking these bars and then react to it. Also I record yesterdays high and low (grey lines) and todays progressive highs and lows again so that I can see what price does after it breaks above or below them. These might in a sense count as extra indicators but I started putting them in just to reduce the number of charts by two.
Aha! You DO use indicators.

Good stuff Kiwi, I especially like those 4 hour and 1 hour background bars. That is almost identical to the S&R indicator i use based on previous ranges. I use 4 hour and 1 hour ranges on the 5min and 1min chart. I use the same type of ranges for all timeframes...ie daily ranges on 30min charts, weekly ranges on 4hr charts etc.

Visually seeing the 4 hour and 1 hour ranges is very helpful to me in identifying potential breakout levels, as you say, very interesting to see how price behaves when it approaches those levels.

Your charts are actually eerily similar to mine, once I remove the bbands and zigzag
  • #49
  • Dec 8, 2007 2:49am Dec 8, 2007 2:49am
yes its a simple indicator to show high, low, open, and close (surely this mustn't be a crime ). enter only on preset sessions like london.
Attached Image (click to enlarge)
Click to Enlarge Name: sc3reen444sh4433ot.gif Size: 25 KB
{Promotion Removed}
  • #50
  • Dec 8, 2007 6:59am Dec 8, 2007 6:59am
Quoting jjk2
yes its a simple indicator to show high, low, open, and close (surely this mustn't be a crime ). enter only on preset sessions like london.
I don't think horizontal lines at prior support and resistance or vertical lines at particular times constitute indicators.

Too me, the "evil" indicator, processes the price or price and volume information and produces something else. That new thing has lag if there is any smoothing and suggests something that might or might not be present (divergences, recommencement of trend etc etc). To me this creates a number of problems for the trader's learning path:
- lag if introduced means you are late in a move
- often particular periods are assumed (14, 12, 26 etc) and were put there by the designer for a reason but are not valid in the situation they are used
- focusing on the indicators takes attention away from price and learning how to use it for profit.

Additions to the chart can have value if enough people use them ... either to support a view or to fade their failure, hence fibs in some contracts and mas in most. Personally I would always recommend the absolute minimum be used.

But indicators are fun, sexy, and provide a feeling of certainty not present when trying to read price, support and resistance and strength of price movement and acceleration. So they will continue to be used and I suspect that most evolving traders will use less and less over time - although exceptions will happily and successfully crowd their charts with the same indicators that others fail with. Such is trading.
  • #51
  • Edited 7:23am Dec 8, 2007 7:22am | Edited 7:23am
Hi Seekinglight,

My opinion on this subject is, That people are not afraid of simple systems.
The problem is that they dont have the knowledge to discover it.

Beleive me, If you give the people here a 'simple system' that certainly works, and doesnt cost half or a quater of their wage, then they will take it.

Leon
Living the adventure in my head.
  • #52
  • Edited 10:16am Dec 8, 2007 10:01am | Edited 10:16am
Quoting Leonlorenzo
Hi Seekinglight,

My opinion on this subject is, That people are not afraid of simple systems.
The problem is that they dont have the knowledge to discover it.

Beleive me, If you give the people here a 'simple system' that certainly works, and doesnt cost half or a quater of their wage, then they will take it.

Leon
I think that most 'simple systems' are not actually simple. The knowledge to make them profitable has just been internalized.
  • #53
  • Dec 8, 2007 10:35am Dec 8, 2007 10:35am
Also, I believe that simplicity can come in the form of an appeal to fundamentals. Don't forget the fundamentals, even if technicals rule the day.

I concur, great post SL, it cuts right through the %$@$%!!!!!

rudenstein
  • #54
  • Dec 8, 2007 10:58am Dec 8, 2007 10:58am
Quoting Leonlorenzo
Hi Seekinglight,

My opinion on this subject is, That people are not afraid of simple systems.
The problem is that they dont have the knowledge to discover it.

Beleive me, If you give the people here a 'simple system' that certainly works, and doesnt cost half or a quater of their wage, then they will take it.

Leon
Even when it is already discovered people don't have time to learn it.
Even if they have time, they want it for free just like that as if it is
inserting CCI or EA alerts on the chart.

So you find that simple system that works are not popular or available.

A system that will make decent returns and millions of dollars will
surely cost more than the price of free download trading ebook.

When i first started 2 years back I asked my mentor why people
use fibo, EMA MACD, ADX, CCI etc. He said

"Everybody uses them because that is what everyone is using"

It is now I came to know why they don't produce good results.
Everybody (95%) of retail traders losing trade uses them.

I cannot remember the last time I use any indicator to enter
and leave trade.
  • #55
  • Dec 8, 2007 12:07pm Dec 8, 2007 12:07pm
I think people make thing complicated only for 3 reason, the first one is because they are under capitalized. They want to have 4,5,6 and even more confirmation before taking any trade to limit the risk. In reality they are doing exactly the opposite, 50% chance is the initial chance of success to any signal, if you wait another Bar, you are (for exemple) 40% win chance now, another bar, 30% win chance. When i need to short, i short, if the signal was a good one ,i ride it, else, im out. Even if i wait for X confirmation, the process will be the same at the end but with alot less chance to have a good amount of pips.

StopLost is the second thing who make some system so complicated. Everybody want to put a tight stoplost to limit the risk and dont want to let the market breath, the funny thing is the market can move by 20-40 pip for no reason and retrace back, if they dont understand what can affect the currency market how they will be able to put a good stoplost ? The forex can move for so much reason, a bank need 200m euro for a client who want to buy a buisness, Visa want to convert a big amount of money,a bank close some position, a rumor went out about a possible hike for the usd, etc.

TakeProfit is the last one. Here is the fear factor. When you are up 15-20 pips and you see the market want to retrace back, you will close or you let the market move against you ? 80% will close, 20% will let the market run even against them. People with strict money management rules are in the 20%.When you take a trade you expect the market to move to the sky or fall to the ground, but its not linear process. If you look at the 4H chart you see easily how a trend can move in the same direction for 12h and more, so why close a trade with 15-20 pips of profit ? 2:1 is a moderate ratio, 3:1 should be the goal.Better to have a lost than have a too small profit, you cant cover a single lost with a so small profit so why not let the market run an see if you was right ?

Using too much indicator will make you to not take a trade when its the time and will get you out too early,its simple as that.

The only way to limit the risk with a good system is realy simple, DIVERSIFY. if you trade 30 paire, the probability you are wrong on them all is realy realy low.If that work for a bank, that work for you too.

My 2c

P.S sorry for my bad english
EricFX
  • #56
  • Dec 8, 2007 1:11pm Dec 8, 2007 1:11pm
Simplicity is in the eye of the beholder.
A poster complained, in another thread, about the "complexity" of someone's chart.
He went on to say that he only used the bare essentials- fib lines and daily pivot.
I couldn't help but laugh. There is nothing any more voodooistic and contrived than fibs and pivot lines.

I think the only meaningful judgement of someone's trading is profitability. If he makes money, he's doing it right. It doesn't matter what he uses. If he doesn't make a profit, he's doing it wrong and it doesn't matter how "simple" he's doing it.
  • #57
  • Dec 8, 2007 3:06pm Dec 8, 2007 3:06pm
Quoting fxbroker
Even when it is already discovered people don't have time to learn it.
Even if they have time, they want it for free just like that as if it is
inserting CCI or EA alerts on the chart.

So you find that simple system that works are not popular or available.

A system that will make decent returns and millions of dollars will
surely cost more than the price of free download trading ebook.

When i first started 2 years back I asked my mentor why people
use fibo, EMA MACD, ADX, CCI etc. He said

"Everybody uses them because that is what everyone is using"

It is now I came to know why they don't produce good results.
Everybody (95%) of retail traders losing trade uses them.

I cannot remember the last time I use any indicator to enter
and leave trade.

i gotta agree. when i first questioned such indicators, the response was "everyone uses them so it works"

however 95% of retailers losing is a bit of a myth and misconception, as those stats are provided by bucketshops themselves. that means we still not certain on winners and losers statistics....but we do know from studies on stock market, 70~80% of daytraders lose....so we oughtta see something similar numberes in retail fore...*cough i mean scamex.
{Promotion Removed}
  • #58
  • Dec 8, 2007 3:08pm Dec 8, 2007 3:08pm
Quoting billbss
I think the only meaningful judgement of someone's trading is profitability. If he makes money, he's doing it right. It doesn't matter what he uses. If he doesn't make a profit, he's doing it wrong and it doesn't matter how "simple" he's doing it.

who knows he may make money and lose it in a few trades dueto poor management. but i see where you are coming from. at the end of the day, its the size of your wallet that is one of the main grading scheme for a trader
{Promotion Removed}
  • #59
  • Dec 8, 2007 3:13pm Dec 8, 2007 3:13pm
Quoting EricFX
The only way to limit the risk with a good system is realy simple, DIVERSIFY. if you trade 30 paire, the probability you are wrong on them all is realy realy low.If that work for a bank, that work for you too.

My 2c

P.S sorry for my bad english
EricFX
30 pairs is a bit unrealistic. most professionals stick to one area for a longer time (exception of stock traders).

and among those pairs, many are postiively correlated or negatively correlated. so it wouldn't do justice by including more than correlated pairs. but i see your point, just trading 30 pairs is a bad bad idea....i d
{Promotion Removed}
  • #60
  • Dec 8, 2007 4:55pm Dec 8, 2007 4:55pm
SL Thanks!!! Thank you for saying the most important and true thing about forex.
Your post is the most intelligent post I've read on this website in months!

Alex
Fuck Forex Factory
0 traders viewing now