Trading Complexity

Here’s a myth you see almost everywhere online: Successful trading is simple.

The truth is, it’s not. That’s just a marketing angle.

If trading was simple, anyone can just pick up a book, follow what it says, and become a winning trader.

But that’s not how it works.

Successful Trading Isn’t Simple

Working at McDonalds is simple.

You show up, follow a list of step-by-step instructions, and get paid at the end of the day. There’s a clear link between cause and effect. Follow the instructions and there’s a 100% chance you’ll get paid. Don’t follow instructions, and there’s a 100% chance you won’t.

That’s not how trading works.

Successful Trading Isn’t Complicated Either

A common misconception among the general population is that trading is complicated.

It’s not.

Sending a rocket to space is complicated. Removing a brain tumour is complicated.

Both of require a set of steps that, once performed, leads to an almost certain outcome.

The series of steps may be long, and some skill may be required, but outside of human error there’s little doubt as to the outcome of following those steps.

This is not how trading works, either.

In Truth, Successful Trading Is Complex

The difference between something being ‘complicated’ vs ‘complex’, is that in the latter case, the sum of its parts is greater than the whole.

When you send a (complicated) rocket to the moon, it will either reach its destination, or blow up along the way. There’s a zero percent chance it will transform into a giant robot and attack the nearest city. The outcome is binary.

The food chain, on the other hand, is a complex network of relationships out of which unpredictable outcomes can emerge. Introduce a new species of frog into an existing natural environment and you might wipe out 70% of the animals in it. There are subtle nuances that, if not fully understood, can quickly lead to dramatic outcomes.

Nature, like the financial market, is neither simple nor complicated. It’s a complex system with a constantly shifting equilibrium.

Successful Trading Is Elegant

The fact of the matter is that human brains are not naturally wired to think about complex issues.

We think about simple things, like what we want for lunch, or perhaps something more complicated, like how to fix that broken down air conditioner. With some rudimentary Googling skills, you can get an answer pretty quickly.

When it comes to complex topics, such as getting children to succeed in school, however, we struggle.

There are too many moving parts, changing in real time, for there to be any easy answers.

By understanding just this, you are ahead of the countless wannabe traders who are still busy looking for that “winning system”.

They’re looking for an answer to a complicated situation without realizing that the market is actually a complex entity.

By |2019-02-10T07:34:35+00:00February 10th, 2019|General, Philosophy|8 Comments

8 Comments

  1. Chekwube November 2, 2017 at 9:13 am - Reply

    Lee, I believe when people say successful trading is simple, they mean your personal trading strategy which should be simple enough for you to understand and implement.

    Someone said if your personal trading strategy cannot be written down in the back of a complimentary card, then it isn’t simple and would be hard to employ.

    But Lee, even investing legends like Warren Buffet said as much about keeping trading simple.

    • Chris Lee November 2, 2017 at 9:59 am - Reply

      Good points. My thoughts:

      >when people say successful trading is simple, they mean your personal trading strategy which should be simple enough for you to understand and implement.
      This saying is a red herring, because one can only implement a strategy that he/she understands, regardless of how simple (or otherwise) it is.

      >Someone said if your personal trading strategy cannot be written down in the back of a complimentary card, then it isn’t simple and would be hard to employ.
      I do not know of any simple solution/strategy that can solve complex issues over a sustained period of time. Here, I’m talking about real-world issues with real-world outcomes, not just from a theoretical point of view.

      >even investing legends like Warren Buffet said as much about keeping trading simple.
      Warren Buffet doesn’t talk about trading. He only talks about investing. Those are two different things.

  2. Paul Odibeli November 2, 2017 at 1:55 pm - Reply

    Thanks Lee,trading actually,isn’t simple. Thats’s the truth. it is a complex scenario,but if one is in grasp,of its complex nature & able to figure it out,that’s when one’s strategies looks simple to the pros.
    Once again thanks for being point blank about nothing but the truth.

  3. Ong BS November 2, 2017 at 2:10 pm - Reply

    just like swimming, the teach is very simple, a few stroke, a few flapping of hands and a few kicking of leg that will set you swimming. Same like karate and kung fu, a few punches, blocking and kicking should be able to defence yourself. It is simple in that sense. When you are actually down in the water you cannot even keep yourself afloat, or when you really face a gangster you are totally at the receiving end, this is tough.Trading is just like that, a few trendlines, support and resistance, moving averages, candlestick pattern and you are instructed trend is your friend, follow the trend and exploit the momentum, simple as that, when you are faced with the real situation it is a totally different story.

  4. patrick November 2, 2017 at 2:23 pm - Reply

    To win you must fail, but, in a forward direction.

  5. Ken Bolland November 2, 2017 at 4:27 pm - Reply

    Superbly summed up. This kind of thing is why I always look for Chris’s posts.

  6. Yudit November 2, 2017 at 10:17 pm - Reply

    For myself this is a very useful and clear article very helpful indeed. I want to be a trader. In the process so far I have discovered (to my dismay) that my brain LOVES simplicity and ABHORS complexity. I have a high fashion and art background so whenever I struggle with complexity I will simply remember: “Successful Trading is Elegant.” I adore elegance and refinement. I thank you for your article. Yudit

  7. Ong BS November 3, 2017 at 2:11 am - Reply

    Basically we are using technical analysis to evaluate a life situation that does not depend on the technical analysis. The Big banks such as Citibank, HSBC etc they behave like a cartel and when they give a quotation how much they want to purchase from you AUD and sell you USD they are not going to look at the technical indicators, they just use their cost add a certain percentage as their profit and either you take it or leave it. Your middle man broker will sometime “play trick” with you by temporary suspending your computer for a short while and by the time your computer comes alive all your open positions are wiped out, nothing technical can help you except you stoploss, may be or worse there might be slippage. Having said that, the technical analysis (or fundamental analysis if you prefer) is simple because it consist certain chart patterns, candlestick patterns, any other indicators, support and resistance, trendlines etc that you can use day in day out that you can deploy with a certain high probability of winning though it is not a certainty. It is simple in the sense because this is something that you can learn. It is complex because you do not know what will be the actual outcome. If George Soros can know what will be the outcome for GBP during the Brexit he would not have lost millions of pound, same for Baring Sanwa Bank, if the Singapore bank manager knew the outcome of JPY he would not short the JPY and caused the bank bankrupt and landed him in jail.

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