STS - What is Simple Trading?

"Success is nothing more than a few simple disciplines, practiced every day."

- Jim Rohn


If you're new to trading, the word "simple" might sound like an oxymoron. Especially given what you've likely seen on television, in the news, etc. But believe it or not, simple trading is an actual thing - and it can be your thing. Your key to success in the markets... in other words your key to millions. That said, simple trading is more than just a slogan. It’s true, I definitely encourage all traders to KISS [Keep It Simple Stupid], and you should…but it’s more than that even. Keep reading to see what I mean.

What Is Simple Trading Exactly?

So what exactly is simple trading?

In a nutshell, it requires:
  • the proper mindset [I call that Emotional Capital -- more on that later... or perhaps in another post altogether]; 
  • understanding, appreciating, and respecting risk; 
  • having a validated trading strategy and setup; and 
  • making sure you have a proper capital base. 

That may sound like a lot, but it's really not. Once you have these simple things in place, trading becomes much easier, far more enjoyable and, you guessed it, "hella" more profitable.

Simple trading is not about picking the right stocks or timing the market. It's about having the right mindset and following a proven strategy. With simple trading, you can trade any market with confidence and consistency. Literally, any market. As long as it meets a couple of bare minimum requirements [mostly volume and volatility related].

If you're new to trading or are struggling to find consistent success, I encourage you to give simple trading a try. It may just be the key to finally achieving your trading goals. Of course, there's more to it than just saying it. But if you can master the three requirements above, you'll be well on your way to becoming a successful trader. So let's dive in and take a closer look at each piece of the puzzle.

Mindset bka Emotional Capital™

The most important aspect of simple trading is having the right mindset. I call this resource "Emotional Capital™."

What is Emotional Capital™? It's a combination of your psychology, your emotions, and your behaviors as they relate to trading.. It's what allows you to approach the markets on even emotional keel, maintain balance, stay calm during volatile markets, and make rational decisions [defined as in the best interest of your account]. It's also what separates the best traders from the rest and determines whether your trading leads to enormous profits or is just a frustrating, expensive hobby.

Your honest answers to the following questions can give you an idea what your level of EC is:
  • Are you committed to achieving trading success?
  • What is your why?
  • Do you believe in the overarching theme of your trading strategy?
  • Do you believe that you can lose on more trades than you win and STILL be profitable?
  • Are you able to TRULY accept risk?
  • Do you understand and believe in expectancy?
  • Do you believe in the expectancy of your setups?
  • Have you spent an enormous amount of time working with [practicing] your trading strategy?
  • Do you always need to know "the why" of a market move before you take action?
  • Do you execute stop loss orders with barely a thought... accepting your losses as just a cost of doing business?
  • How many securities do you trade?
Your answers to the above questions are not necessarily determinative. Nor is the list exhaustive. But they go a long way toward helping you understand where you are in your trading journey.

Without the proper mindset, simple trading is impossible. If you don't have sufficient emotional capital, you'll be constantly second-guessing your decisions, overtrading, and making impulsive decisions that are not based on your strategy or setup.

In other words, you won't be able to stick to your simple trading plan. And if you can't stick to your plan, you're doomed to fail.

So if you want to be a successful trader, it's absolutely essential that you first work on building up your Emotional Capital™. That will, in turn, allow you to really get the most out of the next simple trading requirement.


Risk is something with which every trader must deal. And if you don't understand it, respect it, and appreciate it, you're in for a world of hurt. A lot of new traders think they can just jump into the markets and start making money hand over fist. But that's not how it works. For anyone. The markets are risky, and if you don't treat them with the proper respect, you WILL lose money.

In trading, risk is defined as the potential for loss in any given trade. It is the maximum amount of capital that you are willing to lose on a single trade. This number should be small, traditionally no more than 2% of your overall account balance in portfolio and swing trading. As an example, if Terry has an account balance of $100,000, the maximum risk he can take on any trade using the 2% parameter is $2,000.

Do note that the method of determining what exactly is at risk on a trade is one of the critical keys to profitable trading that is beyond this post, but that I cover exhaustively in other posts. For now, just know that when defining your risk, it is important to consider both the monetary and emotional aspects of potential loss. Monetary risk is easy to quantify and, again, should be relatively small [ala the 2% rule]. Emotional risk, on the other hand, is more difficult to measure but can be just as damaging to your trading account... especially if your Emotional Capital™ is below the minimum required level.

One of the best and most simple ways to manage risk once determined is via stop-loss orders. A stop-loss order is an order placed with your broker to sell a security when it reaches a certain price. This price is typically below the current market price [above if you're short] and is used to limit your loss on a trade. To say more about this too is beyond the scope of this post. But you can find much more about risk management in general and stop losses in particular on my site and/or on my YouTube Channel.

Once you have abundant Emotional Capital™ which you're ready to deploy by using risk to your advantage, you can move to the next phase of development... finding and validating the right trading strategy.

Validated Trading Strategy & Setups

A validated trading strategy is a strategy that has been proven to work for you over a significant period of time. It should be based on sound principles and have a clear, concise rule set that can be followed consistently.

A good trading setup is a specific set of conditions that are known [and have been shown] to lead to profitable trading outcomes. Setups should not be confused with context [which I also require in my simple trading, but that's a post for a different day] like the existence of a trend or a security's consistent position above this moving average or that. Setups should be simple and easy to identify so that you can execute your trades with confidence. The best setups can generally be laid out in a step by step, if-then fashion and will often incorporate elements of both technical and fundamental analysis.

The elements of my simple trades are as follows:

1) Higher Level Context
2) Phase Entry
3) Stop Loss Placement Determination
4) Pre-Trade Stalk
5) Trade Entry Trigger
6) Stop Placement
7) Target Placement
8) Trade Maintenance
9) Trade Exit [Stop or Target]
10) Trade Journal

Of course, as a day trader, some of the steps happen simultaneously and/or in the blink of an eye, but generally, this is the exact process I follow on every trade. Feel free to model your own process after mine. You need not copy this exact process to copy my trading success, but you MUST have a detailed process of your own.

There are many different ways to trade the markets, so it's important that you find a strategy and setup that works for you. There is no one-size-fits-all solution, so don't be afraid to experiment until you find something that really clicks for you. A simple trading strategy is one that is easy to understand and execute consistently. It should have clear entry and exit rules and be based on sound technical or fundamental analysis. There are many different kinds of simple trading strategies out there. Some are trend following, while others are mean reversion. There are also breakout and countertrend strategies. The best strategy for you will depend on your own particular set of circumstances and, more important, your Emotional Capital™.

Whichever trading strategy and setup you choose, validate, practice and, ultimately, deploy, you must "make it your own." It must become a part of your trading habit dna such that you follow it automatically and without question. Then... and only then, can you use the final simple trading requirement, your capital base, to generate far above average returns for yourself.

Capital Base

When it comes to trading, having a sufficient capital base is essential. This is because the markets are constantly fluctuating and even the best trading strategy will have losses in the normal course of business. As a matter of fact, small relative trading losses are a part of doing business in the trading world. You can't have 1 without the other. In other words, it is not possible to trade without losses. You wouldn't try to play basketball without ever missing a shot would you?

If you don't have enough money to cover your losses, especially if there is an early "run" of them, you could find yourself in a very difficult situation. Even the best traders in the world can have losing streaks. This is why it's so important to make sure that you have enough money in your account to weather any storms that might come your way.

Ideally, you should always aim to keep at least 5-7 times your risk per trade in your account. So, if you're comfortable with risking $500 per trade, you should aim to keep at least $2,500 in your account at all times. This will ensure that you have enough money to cover any losses and still be able to continue trading.

Take This With You

Simple trading is a great way to trade the markets with confidence and consistency. In fact, I think it's the best way to engage the markets period. It's all about having the right Emotional Capital™, understanding risk, following a validated strategy with simple, easy-to-identify and execute setups and having the appropriate capital base [especially at the beginning]. If you can do those things, you're well on your way to becoming a successful simple trader.