Improve your Investment Decisions with Occam’s Razor

Trading and investing is complex, especially when looking at crypto markets. How do we deal with this complexity and ensure we remain profitable? One way is to consider Occam’s Razor. This states that the solution requiring the smallest number of assumptions is often correct.

If there are less assumptions we are more able to verify if these hold true. Additionally, a simpler solution is easier to execute. Now, let’s consider some actionable insights into trading and investing.

1. Don’t use too many indicators when analysing charts
   From Elliott wave theory to moving averages to RSI there are a huge number of indicators we can use to carry out technical analysis. Instead of trying to use them all at once, focus on ones that suit your strategy.
2. Don’t get distracted by noise
   There has never been such an abundance of information available to investors, a lot of which can be low quality. Focus on high quality information that affects your strategy and that is actionable.
3. Seek simplicity in execution
   When putting together a saving plan or an investment strategy make sure to keep the number of steps to action this strategy as low as possible. Execution can be half the battle and reducing the number of steps allows us to be more consistent in the long run.
4. Consider relative importance
   Just because a hypothesis is correct, it does not mean it will have a major effect on your strategy. Focus not just on what is correct but what actually has a significant impact on your final outcome.