In today’s episode, we are going to be speaking on the topic of the most effective ways to overcome analysis paralysis!
Analysis paralysis is one of the most common problems that we are going to face as traders; in fact, this is something that we dealt with during the earlier stages of our careers and we’re sure that a lot of you listening are going to deal with it at some point in your journey if you have not already experienced it!
If you find it difficult to jump into the markets or you are too afraid to make a trading decision to buy or sell then you have likely suffered from analysis paralysis!
So what exactly is analysis paralysis?
Investopedia defines this as “a situation in which an individual or group is unable to move forward with a decision as a result of overanalyzing data or overthinking a problem”
When relating this back to trading, analysis paralysis occurs any time our thinking about performing gets in the way of our actual performance. Regardless of your experience level, nobody is safe from analysis paralysis, however, with the tips we will share throughout this episode, you will be better able to overcome it!
Analysis paralysis typically occur for rookie traders when they are trying to do everything under the sun and as a result they end up doing a whole lot of nothing.
Reflecting on our own journey, when Mark first started learning about the markets and doing research, he believed he found the holy grail in indicators - his charts were cluttered with indicators such as moving averages, RSI, MACD and Stochastics and he struggled with pulling the trigger because of conflicting signals from these indicators.
For more experienced traders, analysis paralysis can often occur after a streak of losing trades - especially when the thought of losing the next trade sits front of mind and the trader passes on valid, potentially winning setups.
Why Do Traders Suffer from Analysis Paralysis?
- People prefer to have more choices; we are wired to believe that the more options we have the better the decision we can make
- Leads to information overload and difficulty in making a decision
- The less options we have the more likely we are to make a decision
How to Avoid Analysis Paralysis
- Get rid of the idea that all of your trading decisions have to be perfect
- Simplify Your Trading Plan
- Declutter Your Charts and Keep Only What is Necessary
- Use Visualization
- Focus on the Present
- Turn off the TV
- Use Market Replay to Build Muscle-Cell Memory
- Don’t Risk Money You’re Afraid to Lose
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