Categorized | Stock Trading

How to Avoid Analysis Paralysis in Trading

In trading, you can see analysis paralysis as information overload. It is a scenario where a trader gets overwhelmed by tons of possibilities of price movement in action, and each scenario tends to present an opposing view in the trader’s mind. These opposing views create conflict and confusion, so that the trader finds it very difficult to go into action and execute trades based on clarity.

The best way to avoid analysis paralysis in trading is to stay focused and keep things as simple as possible. So, instead of going deeper in analyzing speculative theories that are rather high-sounding, keep everything simple, stay focused and be alert to lunch trade at the right time.

Here are great tips to help you stay focused and not be lured into analysis paralysis:

Tip #1: Be Sure of What to Look Out For

In other words, refer to your trading plan that spells out your trading style as well as outline the conditions or patterns to look out for prior to executing trade. This will better guide you in when and how to take action. This way, you don’t have to analyze every bar/candlestick but simply place your eyes on helpful indications such as the move that resulted in the breaking of the previous levels.

Tip #2: Pay Attention to the Present Task

Pay attention to those possibilities that would help you take quick and mindful action (execute trade). And, such possibilities should be your focus if you need to make some research prior to executing trade. This way, you will not get into deeper and confusing analysis that would eventually keep you back from executing even potentially profitable trades.

Finally, as a way of emphasis, keep things as simple as possible, which in turn facilitates clarity and ultimately eliminate analysis paralysis. The simpler you keep your trading systems and methods, the more profound and clear things would become.

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