Full Show Transcript

Have you heard the saying “can’t see the forest for the trees?” Seems particularly apt for the environment I’m in right now. I’m in Founders Grove in the Redwoods State Park in California, and this really reminded me of a challenge that a lot of traders are having, particularly in the modern world with all the technology and computing power and all of that where it’s very easy to look at and play with and test lots of different indicators and chart patterns, and there’s umpteen different candlestick patterns that you can use as signals for your trading. Now all of those individual indicators and rules and patterns, they’re kind of like the trees in the forest. I mean, each individual one does something potentially, but the strategy, the overarching strategy is far more important than each individual indicator rule, or tree.

Hey, by the way, check this out. This is the base, the root system of a fallen redwood tree, which is just humongous. Absolutely amazing. But anyway, so the indicators, the rules, and chart patterns, they’re kind of like the individual trees in the forest, but in order to be successful, you need to come up a level from that and look at the big picture. Look at the forest as a whole, and what you find is that it’s the trading strategy that makes the difference.

It’s not an individual indicator or chart pattern. It’s, am I following trends? Am I catching swings within the main trend? Am I catching reversion to the mean type moves? Am I scalping? What is the strategy that you’re using? Then once you’ve got the strategy defined, you go and find the individual rules, signals, indicators, chart patterns that fit within the strategy.

The mistake a lot of traders make is they look at a chart and throw a bunch of indicators on the chart without some strategic intent. If you did that in business, if you just go out and start willy nilly trying to sell stuff to people without a strategy, the business is very quickly going to fail, and in trading it’s the same thing. You need your trading strategy, and then after you’ve got that clear, the tools, the indicators, the chart patterns that you need to use to profit become much more clear and so you can more easily select the right rules, the right indicators, the right chart patterns that fit within your strategy. What that’s going to do is going to eliminate most of the noise. You don’t need to look at all of the different indicators and chart patterns out there because that’s just going to send you into a spiral of analysis paralysis.

But what you do need to do is define your strategy and then choose the indicators that fit within that strategy, and combine those indicators into a trading system that you can test, that you can backtest objectively. Now if you do that, your chances of trading success skyrocket dramatically, and also the other benefit is the amount of time it takes falls very substantially. Because when you’ve got your strategy and you choose only rules that fit within the strategy, the amount of analysis you need to do to come up with a system that is profitable is way less, way less, and you can actually design a profitable trading system in just a few hours with the right method. But the first step is to eliminate that trading mistake of forgetting to see the forest for the trees. You’ve got to choose your strategy first, and traders without a strategy who are just looking at patterns and indicators on the charts haphazardly will never make money.

This is one of the biggest trading mistakes that curious traders make. As soon as you find out about indicators and rules and chart patterns and technical analysis, this is what a lot of people do is they dig in, they find all these tools, and they play with them, and they look at them, but they forget the strategy. It’s a trading mistake that you have to eliminate if you want to be successful.

So if you’re not yet profitable, click the link below and download my trading mistakes cheat sheet, because what that’s going to do is show the major mistakes that most new traders make that are preventing you from becoming profitable. One of those is finding a trading strategy that is proven that actually works, but there’s many other mistakes that are likely holding you back if you’re not yet profitable. So click the link below and download my trading mistakes cheat sheet and I’ll see you in the next video.

My name is Adrian Reid. This is Enlightened Stock Trading. Click the link below and download the trading mistakes cheat sheet, and don’t forget to subscribe to this channel and like this video. If you got any questions, comment below and I’ll help you out. See you in the next video. Bye for now.