“Keep it simple, stupid” – and how to become consistently successful

I like to keep things simple (hello, “KISS” principle anyone?) – and this principle also flows into my investment strategy. It is so easy to become paralyzed with all that the market throws at you: constant bombarding of news, earnings, analyst upgrades/downgrades, entry points, exit points, what the index is doing, balance sheets … etc. etc. etc., that sometimes you have to block out all that information, and just focus on finding a consistent strategy that suits yours style.

In technical analysis traders sometimes like to look for common trading patterns – like a “head and shoulders” pattern or “ascending wedges” pattern. Because these are fairly common, often repetitive patterns that occur, there are traders who only trade a “head and shoulders” or “ascending wedge” pattern. Why is this? Because they become a specialist in that particular trading pattern, that they can expect a certain level of consistency, but more importantly, they can cut losses short (since we all know that nothing is 100% successful).

A better example: If you are a doctor, you don’t become a brain surgeon and a dermatologist, right? You become specialize in one practice type, and become damn good at it.

In my own trading style, I like to trade particular bullish candlestick patterns. By becoming good at specializing in certain setups, I already know two things:

• 1. If I look to take particular setups, I can already expect a certain probability of success. Obviously, my strategy will not work 100%, but if I can put the variables closer in my favor (i.e., just waiting on the sidelines for breakouts to occur), then, I can feel more comfortable about taking specific trades.
• 2. As mentioned in my post about risk vs. greed , entry and exit points are extremely important, and must be established even prior to initiating a trade position. When you specialize in certain setups, determining entry and exit points become second nature to you. This is probably one of the most important reasons why I like to stick to a certain trading style, and would dedicate the time to become great at that particular technical trading setup.

Of course, as I write this, I am still working towards my first goal of making $100 bucks in the stock market, so while the above makes sense to me in theory, we really have to test this out in the real world.