What Does Simple Trading Have To Do With Crabs?

simple trading

Simple is the way to go in virtually every business… trading is just our area of focus.  Ashley Lutz from Business Insider penned an article recently that supports this view.  In the article she recounts the comeback of famed seafood chain Joe’s Crab Shack (JCS) from the edge of extinction.

How did they do it?  They simplified of course.

A few years ago, JCS was in trouble.  In an attempt to save itself, they were closing underperforming stores, but it was a losing battle.

Enter the magic of simplification.

According to CEO Ray Blanchette, when he arrived at JCS he realized the company didn’t even sell a lot of its middle namesake.  It represented about 17% of revenue.  By making the decision to be the best at something and narrowing focus, Blanchette and JCS took crab to about 50% of revenue and set the company on a new course.

Today the restaurant chain has generated 18 consecutive quarters of sales growth.

Restaurant analysts suggest offering servers and too many menu items can hurt customer service because employees (both servers and kitchen staff) become overwhelmed.  Additionally, patrons might also be confused about what to expect from the restaurant.

Confusion… now there’s an interesting term.

Too often, in an effort to improve their win percentage, traders add layer after layer of “information.”  Chart traders pile a gazillion indicators on their charts while fundamental traders wait for more and more company metrics to help assure them that they are “right.”

If you are in either (or both) of these camps, Stop It.  Reduce the number of indicators, metrics or smoke signals you’re using immediately.  They are likely not improving your decision making.  In fact, it’s likely that having too many of them is detracting from your decision-making… either by paralyzing you from analysis or, just as likely, confusing you by pointing in all directions.

Here is a simple precept for your trading business… in order to go up, a stock must first go up… to go down, that stock must first go down.  Therefore, if your stock is going up, you can be long or on the sidelines.  If it’s going down, you can be short or on the sidelines.  To be otherwise is foolish at best and costly at worst.

That’s the extent of it.  Everything else is window dressing… just tools and tactics of implementation.  Keep your trading simple, obey your well tested rules and profit.

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