A KISS trader realizes that the most profitable trades are often those that are the simplest to spot. This type of stock trader recognizes that despite its simplicity, it is the smartest type of trade because it produces the greatest profits.
KISS is an acronym for the design principle "Keep it simple, Stupid!"
The stock trader who adheres to this principle must be aware that it does not mean throwing out all the technical analysis and indicators but to simply (as it says) keep it simple.
Occam's Razor states that one should make no more assumptions than needed. Put into everyday language, it says, “The simplest explanation is the best”.
The principle is often expressed as “Entia non sunt multiplicanda praeter necessitatem”, or "Entities should not be multiplied beyond necessity".
Applying the principle
This principle can be applied to nearly every facet of life and trading, and is positively correlated with experience. The more you know about any subject, the quicker you will be able to find elegant and simple solutions.
A KISS trader, therefore, applies the KISS principle to the world of trading and investing. 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.
Bear in mind that a strategy is not just about entry points. A good trading strategy includes multiple things such as what and when to buy, where to place stop loss orders and when to take profits, risk management, position sizing, expectancy, etc. A KISS trader usually has good discipline in regard to selection and application.
An example of a simple trade by a KISS trader
Apple Inc. (Nasdaq: AAPL) - Hourly chart. As you can see from the hourly chart below, this stock trends very nicely. By simply focusing on price action, support and resistance levels, volume, trend lines and chart patterns, it is quite easy to trade this stock profitably.
Prior to this chart there was a breakout to the upside, then a reversal bounce following, which would have provided an earlier excellent point to enter this stock. By using simple deduction and analysis it is easy to locate a low risk entry point for this stock. This chart provides a trade that can last for several months. The exit point was signaled after a trend line break as outlined on the chart.
Different opinions help a KISS trader
Markets are made because people have different opinions. This is how it should be. If everyone thought the same way, believed the same things - there would be no markets. For example, in the futures markets (basically a zero sum game - but not quite), for every buyer there is a seller. This means that KISS traders are trading their beliefs against the beliefs of those who disagree with them. They know that, as KISS traders, their beliefs are correct if their position is making money.
What is correct? Who is correct? The answer is simple. The markets are correct. If KISS traders are underwater in their positions and in the hold and hope mode, they are not listening to the markets.
The answer is simple for a KISS trader
A KISS trader learns to respond, rather than react. If price is going up, it is going up and that is that. Go with it and continue with it until it stops going up. If price is going down, go with it until it stops going down, according to the direction of the adopted trading strategy - such as put options.
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.Momentum Traders
A trade on the short side with an overwhelmingly large number ...
The absolute level of a fund's investments.
A financial instrument whose value is based on the value of another ...
Catastrophe equity puts are used to ensure that insurance companies ...
Open trade equity (OTE) is the equity in an open futures contract.
Fintech is a portmanteau of financial technology that describes ...
Find out how C-suite officers are evaluated. Learn about the evaluation process, what makes traits a CEO should exhibit and ...
Understand more about a rights offering, and learn the most common reasons a company might have to issue a rights offering, ...
Discover the difference between share purchase rights and options, which are essential to understand when deciding to invest ...
Find out how to perform financial analysis through Microsoft Excel, which is probably the most widely used software among ...