Paralysis by analysis – how to avoid it and trade with confidence

Do you want to know more about the so-called “paralysis by analysis”? Watch our latest video to learn how to avoid it and trade with confidence.

Paralysis by analysis – A simple but effective guide to overcome it

One of the most common problems that a new trader will face is “paralysis by analysis.” Typically, what happens is that new traders tries to find trading systems that assure profits, but unfortunately don’t have the wherewithal to hang on through what will certainly be the occasional loss. Traders tend to put far too much pressure on themselves to be perfect, and of course systems are treated very much the same way. This of course is ridiculous, as perfection is all but impossible.

Think of it this way: if your retirement planner averaged 11% a year, you are not going to be looking over their shoulder and complaining about any time there was a small loss. You must give yourself the same slack when it comes to trading. Unfortunately, most people don’t, and this is where they start to get paralysis by analysis.

Paralysis by analysis is best summed up as having far too many indicators or rules for a trade set up. This leads to a lot of concern and mistrust, and far too many options to bailout of a trade. There are a lot of psychological issues when it comes to trading, but this is probably the most common, as it is easy to set so many rules that you can’t pull the trigger.

While a lot of people think it makes sense to have a long list of rules, the reality is that this keeps the trader for making profits. After all, if you are not in the marketplace, you can’t make money. This isn’t to say the should be jumping into the market randomly, but rather that you should make it possible to get involved. One aspect of having a multitude of indicators on the chart is that it is used as a crutch to help with fear. It is a fear of loss that you ultimately are struggling with, which can be avoided by simply trading with the longer-term trend and using proper money management. If you can see everything but price on the chart, you may have an issue. Professional traders tend to use a very light number of indicators.