KISS Formula


There are formulas for just about everything, but it has been shown that the simpler theformula or method of doing a particular taskthe better it works. It has evolved down toKISS - Keep It Simple Stupid.

This also applies to trading in the stockmarket. There are literally hundreds offormulas, both technical and fundamental thatare easily available to investors. Each traderhas his own method he uses. Every professionaltrader on the floor of the stock exchange hashis own variation on some major provenformula. The more skilled he becomes with itthe more he feels it is the best one.

Sometimes it takes years for a trader tosettle on one method or group of methods thathe uses to signal buys and sells. It took memany years to find that technical group thatworked for me when I was an exchange member.

For some it evolves into long term tradingand for others it can be buying and selling ina matter of minutes. The time period is notimportant. The method is. Even as a floortrader on the commodity exchange I had onlytwo criteria I watched before entering intoany position.

All professional traders and investors areaware of the single most important fact andthat is how much I am willing to lose before Iexit this new position. Every KISS formula hasan exit strategy. Every professional knows inadvance how much he will allow himself to loseif he is wrong. The professional does not seta limit on the winning side of a trade only onthe losing side.

When I see advertisements in the financialpapers for methods claiming to be right 80%,90% of the time I cringe. It just can't be. There is no trader I ever met who was thatgood and I have known some exceptionaltraders.

The major text on technical analysis is"Technical Analysis of Stock Trends" byEdwards and Magee now in the 17th printing ofthe Fifth Edition that lists multitudes ofmethods. They all work, but many arecomplicated. A magazine called Futures Truthanalyses 200 commodity trading systems in eachissue. Fundamental Theory is equally complex.

There are software programs that allow theinvestors to enter as many as 30 parameters. The more complex it is the less chance it hasto work. And the biggest obstacle to anyprogram is the trader himself. He cannothesitate when a buy or sell signal is given.

Keep your formula simple and execute thesignals. You can be a winner.

Copyright 2005


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