Many years ago, in one of my fledgling efforts to be a writer, I penned a biweekly newsletter called
The Golf Report
. Overall, I thought the writing was pretty good, and it certainly had more zing than the current batch of fawning golf periodicals.
In each issue, I tried to offer a unique way of looking at things, with some hits and plenty of misses. One concept I tackled was the whole "who's going to win next week" aspect of golf.
, in particular, always had a handicapping sheet of who was expected to win each major tournament, and I simply expanded this to the weekly tournaments.
I started out like a lot of handicappers do, first with one indicator, then a few more, then indicators to check my indicators, and then algorithms out the wazoo. After doing all this, of course, I usually arrived at the fact that, really, no one could win. My multiple indicators never quite lined up 100% for anyone!
, on the other hand, seemed locked in the Stone Age. Invariably, its list would always include the usual suspects, and no matter how lousy a
was playing, well, by golly, he'd be assured a spot on
Finally, after looking for a solution to simplify my selection process and come a bit closer to picking the top contenders, I arrived at a simple, elegant algorithm: The golfer who was mostly likely to win the next tournament was invariably one of those who played well in his previous tournament. In effect, all I had to do was look at the top 20 finishers from the week before, and lo and behold, included among them was my winner!
As an example, take a look at this year's PGA winner,
. Sure, Greg Norman's a super player. And I love
, too. But no one had a hotter hand coming into the PGA than Woods. Forget, for a moment, that he's a super player. There are a lot of super players. No, he was on a roll. And that made him the overwhelming favorite.
And the second-place finisher,
? Naturally, he played well the
week, finishing tied for 13th.
So, what's my point? And how does all this relate to trading? Well, in picking winners, I've always found it easy to just go through the new-highs list looking for potential candidates. Shoot, those stocks are already winners, and many are likely to be winners the following week. I've never tested it, but I am betting you'd do pretty well just by buying every stock that hit a new high on Tuesday, and then selling them all the following Tuesday.
But my broader point is this: There are always simple, easy ways to trade the market and make money. Yet, from what I read, people seem attracted to the arcane, the expensive or the insanely muddled.
A good example is the
package. A fine package, to be sure, but are hundreds upon hundreds of indicators really necessary? Oscillators, stochastics, trendlines, Fibonacci numbers, Elliot waves. I mean, really. Either a stock looks like it's going up or it looks like it's going down. I don't need 53 indicators all in sync to tell me that.
Yes, yes, I know, trading's more involved than that. But does it have to be? I was reading recently that if you just bought the
index in October and sold in May of the following year, you'd outperform the yearly gain of the S&P by a huge margin. And that's the kind of simplicity I'm constantly looking for.
So, I guess what I'm saying is that I'm on a simplicity kick. I've always said one of my mottos is Keep It Simple Stupid, or KISS (the other: Often Wrong, Never in Doubt), so I'm going to start with this column, and perhaps in subsequent columns, by examining that concept and giving you concrete examples of what I'm talking about. And if you at least think about what I'm talking about, my bet is your trading will improve.
Therefore, here are two things right off the bat that will simplify your trading and improve your results.
- KISS principle No. 1: Turn off
CNBC. That's right, you don't need it. Sure, I find it entertaining, and I get a particular kick out of
Insana. But, let's face it, has
CNBC helped your results? Yeah, maybe if you're an ultraquick daytrader. But for everyone else, the various talking heads, analysts, handicappers,
Fed watchers and market gurus paraded in front of you can't forecast the future, but they do create anxiety in your trading that you're better off without. (Note: Yes, I'm fully aware this begs the question of whether to watch "TheStreet.com"
television show. Well, I never said "don't ever watch
CNBC." You can watch 30 minutes a day. But then, you have to watch the
TSC show for 30 minutes each week!)
KISS principle No. 2: Log off the chat boards, particularly the ones discussing your favorite stock. In fact, if the choice was watching seven hours a day of
CNBC or one hour a day reading the chat boards, I'd rather you watch
Look, I'll admit there are some educational, helpful boards out there. But most are just full of blustering folks, who -- while certainly entitled to their opinions -- don't add anything of value other than, well, their opinions. As an example, here are the "headlines" from the recent
, publisher of this Web site.
-- JAMES CRAMER IS THE MOST ANNOYING ...
-- THANKS FOR THE 30 DAY FREE TRIAL, BOB
-- Who's TheStreet badgering this week?
-- Shorted Big This Pig
-- Cramer scorecard
-- DAN DORFMAN HAS A BIGGER MOUTH!
-- BECAUSE ITS A BETTER SITE!
-- What are TSCuM Bags writing about now??
-- STK, TSCM is a proven winner!
-- My God, your long-winded, old guy.
-- STK, Have you been drinking??????
Trust me, you don't need to read the entire posting to get a feel for what's here. Now, is this kind of stuff helpful? Yeah, I guess if your trading decisions are usually made in a men's locker room right after half-price "kegger night." (Sorry, ladies, I don't mean to exclude you. I just have a good feeling most of these boards are male-dominated.)
I've read other boards about stocks and companies I know a great deal about, and I've yet to find one with any significant value. In fact, when I do know the facts about a company, what I usually read isn't even close to the truth. What, you think
is secretly logged onto the
chat board, revealing upcoming product plans?
So save yourself some time and avoid the chat boards. They absolutely will not help you become a better trader. However, they will distract you and clutter up your thoughts with a bunch of nonsense.
And that's the opposite of KISS.
The bottom line? If you try to make your trading simpler, it will get better. The ultimate goal: a one-indicator method that simply gives you a binary buy/sell decision for any stock you're considering. Sure, you'll never get there. But you'll get better just trying.
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at