Simple Can Be Better
12/20/2013 6:00 am EST
Anne-Marie Baiynd discusses why a trading approach does not have to be complex in order to succeed but one needs to be selective.
SPEAKER: My guest today is Anne Marie Baiynd and we’re talking about simplifying your trading. There’s probably a tendency for traders to overcomplicate things but it doesn’t always have to be that way so Anne Marie, why do traders think that you need some very complex system to really make money?
ANNE MARIE BAIYND: You know, I think we think that way because we’re brought up in a culture that says more is better and the more intricate something is, the better it happens to perform and so that falls into the trading space when indeed although trading is not a simplistic act, you can approach it from a simple perspective and just build depth and I wish people knew that.
SPEAKER: Even something as simple as a moving average, you could use that, could that be your entire system, a 9-period moving average crossing above a 20-period. Could that be a system?
ANNE MARIE BAIYND: Absolutely. The way that moving averages work is that some places they’re really great and some places they’re really not so in order to use something simple like that, we must first figure out the playing field, right? I mean the market is open in itself like a big amusement park but if it’s raining or snowing sideways, five below zero, we really shouldn’t go and the market is the same way. Those big long wicks, things that we need to look at like that, choppiness, you’re not going to want to use a moving average by itself but if you can establish how a chart looks when it’s in a trend, then you can say you know what, as soon as it crosses this event, I’m going for it and I’m going to get out when it’s broken and it re-crosses.
SPEAKER: Does that argue then for only trading things that are trending in the system that you like? For newer traders, is that’s what best to eliminate anything that is sideways and just trade the trends?
ANNE MARIE BAIYND: That is very true. It is the very best thing for a trader to do especially if they’re new. We build nuances in our skill levels as we get further along and so when we come into trading, we can’t expect that we’re going to understand really complex things. It’s just not how we work. It’s got to be simple and so yes, look for the spaces where it looks easy. That’s the best thing to do.
SPEAKER: What’s a trader to do in terms of let’s say they’re just going to use a moving average? Is it a matter of testing different ones to see what works best? Should I buy somebody else’s moving average system? What do I do?
ANNE MARIE BAIYND: You know for me, I think the 50 and the 200 are the two most important moving averages. Some folks go wow, those are so far away. Certainly if you’re looking at it on a daily, that’s true but if you are trying to make a trade based on those two moving averages, all you have to do is use different timeframes. The smaller the timeframe, the tighter the timeframe, the tighter that moving average will be the close it will be to your candlesticks.
SPEAKER: And so do I want to confluence of that 50 and 200, do I want it saying the same thing on the daily chart as the hourly chart as the monthly chart?
ANNE MARIE BAIYND: That’s right, yes. That is the very best way to do it.
SPEAKER: Okay, and how about we talk about stocks or futures, does it matter what I’m trading?
ANNE MARIE BAIYND: You know, that’s the great thing. It doesn’t. It really, really doesn’t. The one thing to always watch out for are those giant wicks. Look around to see how those charts are behaving because if they’re behaving poorly, it’s going to affect how you get into the trade and how much you get into the trade but essentially a very simple system like that will work wonderfully as long as you have trend.
SPEAKER: Anne Marie, thanks for your time.
ANNE MARIE BAIYND: Thanks for having me.
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