Forex Traders Are Confusing Complexity With Thoroughness

One of the biggest mistakes Forex traders make, especially beginner Forex traders, is confusing complexity with thoroughness. They think if they load their charts up with indicators and follow a complex set of entry rules they will avoid losses and make tons of money. Unfortunately, complex, hard to follow trading systems are not the answer to success. What you really need is a simple trading system that is thorough.

The Difference Between Complexity and Thoroughness:

First, some definitions are in order. According to the Random House Dictionary complex is defined as "composed of many interconnected parts" or "so complicated or intricate as to be hard to understand or deal with". I personally don't want to base my trading activities on a system that is confusing and hard to understand. This seems like a great way to make bad trades because the more complex indicators you use, the easier it is to misinterpret what the charts are telling you to do.

On the other hand, thorough is defined by the Random House dictionary as "executed without negligence or omissions" or "extremely attentive to accuracy and detail". OK... now we are talking. A Forex trading system should be executed without negligence or omissions and extremely attentive to accuracy and detail. Those qualities are what make for a winning Forex formula.

An Example Of A Thorough Forex Trading System:

One of the best ways to understand the difference between a complex and thorough trading plan is with an example. There are a lot of steps you must follow for a winning Forex strategy. First of all, you need to pick you winning system. You need to identify what type of trader you are and what time frame you will trade on. You need a simple way to figure out what the charts are telling you... and by this I mean price action and not a lot of indicators. You need to know the exact entry point of your trade. You need to know where to place your stop loss. You need to be able to identify profit targets and calculate your risk. You need to be able to decide if the trade is even worth taking according to the risk - reward ratio. Then, once in the trade, you need to know the exact steps you are going to take to get out of the trade with as much profit as possible.

Are you beginning to understand what a thorough trading plan is? Every aspect of taking the trade is addressed. You know what to look for on the charts. How to plan the entire trade even before you place the order. How to determine your risk and reward ratio. And you know the exact steps you'll take both to get into the trade and out of the trade with profit and little risk.

What you didn't see is a complex set of rules that are hard to understand and follow. You see, there is a lot to focus on to make a thorough trade with the highest probability of success. The last thing you want to do is add complexity to the trading that diverts your attention from being thorough. Because in my opinion, a thorough trade is a good trade.

I think a lot of Forex traders get caught up with complexity. They think if they add a ton of indicators to their chart and identify some "secret" combination of indications they are going to be successful. But while there are struggling to find this unbeatable combination of indicators... they are missing profitable trades based on simple and proven trading strategies. Plus, they are committing the biggest sin of all... they are not being thorough in their trading.