I have been beavering away at this presentation I am doing on The Simplicity of Trading and part of the presentation looks at why we try to make life hard for ourselves. And the most effective answer I can come up with is simply because we want to and there are a few facets to this.
It is undoubted that we equate complexity with effectiveness. The belief is that more tools will in some way to remove the opacity that faces us when dealing with price. This is a natural human tendency, complexity is equal to progress. And if the market is a problem to be solved then a complex solution to a complex problem seems to be the ideal approach. But this fails a basic test – if complexity worked then every trader who owned a trading package that allowed the application of batteries of tools would be profitable and they are not. My observation has been quite the reverse.
However, I think there is another force at play – ego. Traders make it hard because they want to. I feel in large numbers of traders there is an intrinsic belief that says if my training system is complex and no one else can understand it then I am naturally cleverer than everyone else. So the need being serviced is not the need to be profitable but rather to be acknowledged as doing something clever. In many ways this ties in with the long-standing finding that the majority of traders do not trade for profitability but rather for entertainment. You could class this ego stroking as a form of entertainment and it does resonate with the Ed Seykot quote that everyone gets what they want from the market.
But it does raise a challenge for traders who have immensely complex trading systems because at the end of the day they have to ask themselves why when faced with a simple chart such as the one below that they just can’t buy the stock without a plethora of other tools. The answer will probably lay someone along the lack of confidence or look at me I’m clever spectrum.