Ask Colin

What is the difference between a simple system and a complex one?

These are not precise terms.

In general a simple system would be one where you trade when price bars cross a moving average, or when RSI crosses out of overbought or oversold. These simple systems lie behind many black box computerised trading systems. They do not work. If it was that easy, everyone would do it and then it would stop working anyway.

In general a complex system has several elements. A good example might be to use Directional Movement to tell you when the market is trending. You might then use a moving average to trade trending markets and an RSI to trade ranging markets. In both cases you might overlay this with a Parabolic SAR to give you stops. These complex systems have more chance of working, but require extensive testing before money is put behind them.

Some indicators are simple to calculate. An example is Rate of Change. Other indicators are complex to calculate like the Directional Movement. So indicators can be simple or complex. This is not the same as simple or complex systems.