By Sam Evans, Co-Founder & Lead Coach

I have met many traders looking for the secret sauce. The truth is that there is no secret to trading success. In my opinion, there are key factors and elements which go towards making and building the complete trader and investor.

One of them is accepting that loss is part of trading. Accept this truth early in your career and things will improve in leaps and bounds. Try to avoid loss, and inevitably your actions will result in frustration. There is no perfect system that always results in winning. Losing is a part of the game. Your aim should be to keep the losses small. By doing this you will keep yourself in the game long enough to get the larger wins when they happen.

Over my years of teaching, I have noticed how so many students of the market can easily fall into the traps of over-analysis and seeking perfection. I would go as far as to say that every single person trading the markets in some way, shape or form has fallen victim to “paralysis by analysis”. I often find that these traders are not looking for a system to help them win more frequently. What they are looking for is a system that will prevent them from losing more often than winning. This simple observation highlights the inner psychological frailty which is ever-present in all human minds. o be conquered quickly in a speculator’s trading career. A good trader knows that you need to lose, to be able to win.

We have all made that major discovery when looking at charts, which then falsely lures us into thinking that we have finally found something which works the majority of the time. Trading success is within our reach! We then begin to enjoy limited success for a short run of time. Unfortunately, it never lasts and we end right back to where we started in the first place.

Often, this happens when a trader attempts to use too many technical indicators on a chart. The flip side of this scenario is that the reliance on technical tools alone can easily (and wrongly) distract the trader’s attention from the things which he or she needs to be focusing on. For example, take these two separate chart layouts:

In this first example, we are looking at the EURGBP currency pairing on a Daily chart with a whole host of indicators applied. Bollinger Bands, Moving Averages, MACD, Stochastics and RSI. This array of tools may seem impressive at first. However, we need to answer one question above all else. What do the indicator tools tell us that price fails to tell us? The illusion created by this chart is that we know more because we have more information. However, does it help us to make a qualified decision to find a trading opportunity? Compare this chart to the following one:

Here we have the very same chart of EURGBP but with all the technical indicators removed this time. By simply highlighting the most obvious traits of price action like Trend, Retail Zones and Wholesale Zones, the objectively analytical trader can now cut through the noise of derived indicators (which should be noted only function as a result of price itself) and gauge the next possible move for the pair. Any indicator signal given from the previous chart will always lag price itself, seeing that the indicator requires price to move in the first place, thus slightly defeating the objective of using them in the first place. From looking at this example we see that following a steep and decent uptrend in the summer months, the pair has now made lower lows and lower highs, showing potential weakness in the currency pairing since early September. 

We could simply look to short the pair at one of the previous Retail areas following a rally in price, for a low risk, high reward trading opportunity should the EURGBP go on to make further lows at the year closes out. I am not concerned with the result. Instead, I am concerned about the setup itself and what the chart is showing me objectively above all else. I know I may be wrong and I can live with that. The loss will be small. My reasoning for taking the trade is logical and objective as opposed to over complicating my analysis with what an indicator is telling me to do.

This approach may seem too simple for some. However, I know that in my experience of trading, simple always offers me the path of least resistance. Many novice speculators make the mistake of believing that it can’t be this simple. That there must be some magic formula out there or a secret to trading success. This is simply not the case. Only the strong of mind, disciplined in nature and simple in analysis have the greatest chance of attaining consistent profits in trading. I often find this is the complete opposite to what many people believe is needed in today’s trading environments.

The best thing you can do is stop frustrating yourself by searching for the answers to questions that will never be answered. Instead, you should sit back and see that you already have sitting right in front of you. The secret to trading success was there all along. I hope you found this useful.

Thank you and be well,

– Sam Evans