Unraveling the Myth of Perfect Strategies

• The importance of having a strategy for traders:
• The concept of the optimal trading strategy:
• Why do researchers fall into the trap of optimal strategy?
• The ideal trading strategy! Why is it a myth?
• The best way for optimal trading strategies!

Introduction

A trading strategy is like a map, guiding the trader on the right path while avoiding pitfalls. The main issue isn't in following or creating strategies, but in the pursuit of the "ideal strategy." Many traders fall into this trap, applying multiple strategies that waste time, money, and opportunities.

Constantly changing strategies can lead to frustration and skepticism, especially in financial markets with high uncertainty, where even professional strategies need constant adjustment.

The importance of having a strategy for traders:

The strategy has been defined as a roadmap for traders, which helps them analyze the markets and determine their trends to make the best decision, hence the importance of having a strategy as follows:

1. The strategy protects against absurdity:

If the trader does not follow any strategy, he will generally be confused and affected by all the noise and rumors surrounding him, leading to what is called the absurdity of trading, where wrong or conflicting and quick decisions are made while the trader seeks to either achieve profits or reduce losses.

2. The strategy increases awareness:

One of the most prominent benefits that arise from following the strategy in general is that it pushes the trader to realize his goals from the beginning and enables him to determine the most appropriate tool to achieve those goals, whether by learning the basics of trading and analysis and what it entails in terms of acquiring knowledge and culture.

3. The strategy is a tool for risk management:

Following a specific strategy, especially if it has the characteristics of an effective strategy, contributes to reducing the trader's exposure to losses, by following rational decisions, which is considered a method of risk management.

4. Developing professional strategies among traders:

Following a strategy and developing it (by modifying or replacing it) contributes to developing professionalism among traders, given the experiences and circumstances they go through that can be a useful lesson for them in seizing opportunities or reducing losses that they may be exposed to.

The concept of the optimal trading strategy:

The optimal trading strategy is generally defined as the best way to achieve maximum profit with minimal loss, consistently across different circumstances and times. However, this ideal concept contrasts sharply with the reality of financial markets, which are marked by constant change and uncertainty due to various economic factors. No single strategy can handle such fluctuations without evolving over time.

For instance, during the 2020 pandemic, defensive stocks outperformed, while in 2022, the rise of artificial intelligence boosted semiconductor companies. This highlights how market developments can radically change the trading landscape, proving that no strategy remains ideal in all conditions.

Why do researchers fall into the trap of optimal strategy?

Despite many people's awareness of the changes that financial markets are experiencing, and the exceptional circumstances that they may be exposed to, some traders insist on searching for the optimal strategy and the best way to trade, with the aim of following it permanently, which may have reasons that are either personal, psychological or external, and the following are the most prominent of these reasons:

1. Searching for comfort: Traders, especially beginners, seek to search for quick and comfortable profit, without trying to make any effort in that.

2. Low confidence: Traders, especially beginners, lack experience in trading, or lack information or scientific background about these markets, which leads them to use the strategies of other traders who they believe are more experienced than them.

3. Misconceptions: Some traders enter the market with false preconceptions and beliefs, that this market is not for simple people but for professionals, which makes them unable to learn the basics that enable them to understand the strategy, build it and modify it later.

4. External noise: Some traders fall into the trap of scammers who promote effective strategies through various means (refer to the article on discovering unrealistic advertisements)

5. Frustration: Some traders who build strategies and suffer losses, either because their strategy is ineffective or incomplete or due to circumstances beyond their control, become frustrated and rush to search for the best strategies to follow, which in this case are aimed at compensating them for past losses.

The ideal trading strategy! Why is it a myth?

Although some professional strategies may work well for a certain period, they may suffer a setback due to uncontrollable circumstances, whether related to the instrument, the trading method, the market itself, the global economy, or even the trader himself (whether in terms of his financial size or on a purely personal level).

In fact, the concept of the “perfect strategy” is an oversimplification by traders of the complex and interconnected environment in which the various financial markets live, as it assumes the existence of a single ideal strategy that ignores the nuances or developments that may turn the economic scene upside down.

The best way for optimal trading strategies!

After reviewing the concept of strategies and their importance and explaining the concept of optimal trading strategies and the contradictions and myths surrounding them, the need to review the best way to find or build strategies and follow them in a way that achieves the best results increases.

Here are some of the most important tips that can contribute to increasing the effectiveness of trading strategies in general!

1. Find the strategy and develop it!

Searching for or building a specific trading strategy is necessary and inevitable but developing that strategy to reduce its disadvantages or increase its effectiveness is the key to any strategy.

2. Discipline is the most important part of any strategy!

Many traders face losses despite having strategies, and they may even be exposed to losses despite the professionalism of that strategy, which happens for a reason related to discipline and real and permanent commitment as much as possible to all the details of the strategy that are determined by them.

3. Create a trading routine and stick to it:

The trader's determination of a strictly defined daily trading routine helps him follow the strategy he has chosen, by specifying the time, the mechanism for following the news, the method of analyzing the markets and indicators, reviewing the plan and results, and knowing the surrounding circumstances as much as possible. This even contributes to increasing discipline and raising the level of calmness in the trader.

4. Realism in choosing and building the strategy:

Developing a rational strategy is very useful in application and accepting everything that may happen during implementation. It also contributes to understanding the errors, stumbling blocks, or surprises that this strategy may be exposed to in order to develop or replace it.

5. Using technology:

The use of technology, especially advanced technology, in building or developing trading strategies has become possible and available, but on the condition that this is done after deep understanding or resorting to real experts who can help you use this technology in realistic trading strategies and not ideal strategies.

Conclusion:

Having a strategy is essential for any rational trader, but the idea of an "ideal trading strategy" is unrealistic in a world of uncertainty and constant change.

Traders must understand trading strategies and engage in continuous learning to avoid emotional, impulsive decisions.

The key to success lies not in a perfect strategy, but in how the trader adapts and behaves when applying it, adjusting the strategy based on market conditions or personal circumstances.