A couple years ago I remember a day trade where I lost half my portfolio. Or almost did anyway. I don't remember the ticker but it doesn't really matter. I was trading with about 5k. Right after I entered, the market was halted and when it resumed I was down 50%. I was down $2,500. It was sickening. But I lucked the hell out. I had little experience at the time but I thought I would hold out overnight and catch the dead cat bounce. At least then I could gain a little back. It more than worked. I actually was able to close out the position flat with a sigh of relief. I don't think I could replicate that kind of luck again in this lifetime. Which is unfortunate, because I sure would have loved to be one of those guys that makes 400k overnight. Oh well.
I kept watching that ticker symbol and following what people were saying about it on StockTwits. After the bounce the stock did inevitably tank again. (Refer to my rule number 2 from last weeks post). People were so confused. They were citing all sorts of technical indicators. I heard things like "this is so oversold" or "just wait until that moving average crosses again, this will skyrocket". The mood in those forums turned to depression shortly after as it started to sink in that those who remained were left holding the bag. But still they insisted on believing their beloved technical indicators even though they led them astray.
In my opinion people tend to place too much emphasis on their favorite technical indicators. We've all see the screen shots of the "gurus" who have 20 multicolored lines crisscrossing their screen. They must be super smart in order to process all that info in a timely manner. I bet the secret to trading is hidden in there and if you buy their 1.5k program they'll tell you what they see in it all. Okay, sarcasm aside, technical indicators are developed by smarter people than I, and have legitimate uses.
The reason why I have a problem with it all is because in general, TI's show rolling averages of past information. There are only a few metrics that are measured live. Those are what I prefer to base my trades on. They are price action, volume, and level 2's. Everything else is secondary for me. This bare bones approach has been effective for determining both day trades and swing trades.
The strength of decluttering is speed. Some traders argue that you must study a stock for months before you buy it. That doesn't make sense to me when I have all it's history right now. Building months more history while I watch doesn't exactly give me an advantage. It's just boring. I want to be able to analyze several stocks a day within an hour. This shouldn't come as a surprize, I am the Lazy Trader after all. I can tell within a minute if I'm not going to buy a stock. It only takes a little bit longer than that to determine if it looks interesting for a possible trade. After watching the price action for a little while I determine a good entry and then I make my move. This minimalist approach is not without weaknesses, however, no strategy is perfect.
I don't know if it's a hobby or seeking confirmation of my thought process or flat out just to inflate my ego but I still like to get on various forums the day after a stock had a major spike. I am always astonished, and sometimes annoyed, that there is always a new generation of bag holders born. The conversation never changes either. It's like there's a script for these guys. Seriously, check it out sometime. I think they must learn the dialogue from the actual pumpers who are long gone by that point. I also think these must be the infamous 9 out 10 traders that fail and give up.
Anyway, my point is this: things don't need to be complicated to be effective. My dad always said, the best approach when working on something is K.I.S.S. Keep It Simple Stupid. I mean I got good grades (mostly), but I'm not sure how I feel about my dad always calling me stupid. And I mean constantly. He always used to do this joke where he would put his hand on my head like a spider pulsating up and down and would ask, "You know what this is? It's a brain eating spider. You know what it's doing? Starving." Or if I ever got a brain freeze he would say, "You have to have a brain to get a brain freeze. Now I, on the other hand, I can get a brain freeze." But to be fair he is the smartest person I've ever met so I guess it's not without merit. Plus I turned out relatively successful and functional so I can't really complain. Also, I won't apologize for my many tangents.
Anyway, back to the topic. Don't let yourself get analysis paralysis. When I first started trading I thought that having a lot of technical indicators up on the screen looked sophisticated. It made me feel like I knew how to do something no one else could easily understand. And that works if my goal is to be braggadocio. But it isn't. I want to trade well and make money. If that's what you want too, then in the words of my dad: Keep it simple stupid.