The other day Brett Steenbarger referenced a post by Trader X in which he talks about simplifying his trading. I’ve always been a proponent of this as many traders seem bound and determined to make trading as complicated and complex as they possibly can get it. He’s currently using 14 different set-ups to identify trading opportunities and wants to cut it down to more like five.
He also talks about the importance of using good trading tools, specifically saying:
I am amazed at the number of people who are trying to DAY-trade by using Yahoo! charts or some equally insufficient charting tools provided by an online (web-based) broker.
The main argument I hear is that the tools I use are too expensive. Too expensive? If the tools I (and professional traders) use are too expensive, then quite frankly you are not ready to trade. You are either undercapitalized, or you do not have the proper mindset.
I’ve written about thisÂ exact subject before in theÂ Thinking Like a Professional TraderÂ post and When Free Isnâ€™t and Paying Makes Much More Sense. And I’m not the only one to suggest that trying to do things on the cheap can be counter-productive. Give a read to Learning From Free Contentâ€¦ And why itâ€™s Not Always Enough.
The bottom line is that you need to use the tools that are going to give you the edge necessary to make money in the markets. If they cost money (and the really good stuff usually does) then so be it. If you make more money withÂ a given tradingÂ tool than you pay for it then you come out ahead.
Having said that, an earlier Trader X postÂ brought upÂ about something else, I’ve discussed recently – focus and sticking with a strategy, not bouncing around from one to another. He calls it “chasing success” and notes:
…most people jump from indicator to indicator, timeframe to timeframe, method to method. They will use something for a few days, hit a bump, and move on to something different all together.
As many folks who have been in the trading game a while will admit, this is absolutely true. I know I did it in my early years of researching and exploring. I will say, however, that I didn’t actually trade all these different techniques. I did system testing type of analysis, which helped me see the strengths and weakness of different approaches. That, in turn, helped me sort out which type of trading approach best suits my personality. It’s something I definitely recommend. The more time your spend with a given technique, the better you will know it and how to apply it.