Traders beware: Don't fall victim to analysis paralysis

Most traders start out absorbing information from everywhere and anywhere they can. This information will come from several different sources. Books, seminars, trading coaches, gurus, social media and blog posts like this one.

A new trader will take all of this information and fuse it with their own personal beliefs, personality traits, digest it and mould the base for their trading. Now, this new trader has a base for their trading style the next step is to take all of this new information into the markets. This can be exciting and a bit daunting at the same time. If they’re lucky they’ll put on a few trades and things will go according to plan. The money will just flow. If they’re unlucky, they’ll quickly realize why 90% of traders fail within the first few years of taking up the charge.

No matter how you start out every trader inevitably faces a loss that will hit them right in the gut. This loss will resemble the first time a girl broke your heart or the disbelief you had when you heard at school that the tooth fairy didn’t exist after your parents had been encouraging you to hide your teeth under your pillow for years.

You will feel a sense of utter disparity as your trading world crumbles around you much more quickly than the time you have spent to build it up. This is where a lot of traders, in an attempt to improve dump all their current knowledge of trading onto their charts and smother them with indicator upon indicator, believing this will somehow make their analysis more accurate. However, the exact opposite happens, they become confused by their own charts, things have become cloudy, and not just because of the Ichimoku Clouds (pun intended). Their charts lack clarity which affects their analysis negatively, they have fallen victim to analysis paralysis, leading to more losses.

Indicators can be useful however it is important not to rely on them too much let alone overload your charts with them, a maximum of four indicators on your charts seems to be the golden number, however some would suggest even less than that, some traders may even suggest not using any indicators at all, however I do like to stress that you must find the style of trading that suits you, your personality, your lifestyle and your goals. Once you have the right set up for you, you’ll be taking the first steps towards becoming a successful trader.