Boy oh boy do I get this question a LOT. Analysis Paralysis. For those of you who know what it is, you understand the frustration it can cause. To those who have yet to have had the joy of enduring this phenomenon, let me explain. Analysis Paralysis is what happens when you over-analyze your trades. You get the setup, you have the location, everything is locked and loaded… then out of nowhere, WHAM! The MACD makes you stop in your tracks.
Indicators, trading patterns, systems, and everything in between. They are great things to have, but when they all show up at once it get’s very overwhelming. You begin to second guess your trade setup. Is it really that good? Maybe I missed something…? It leads down the rabbit hole of self-doubt in your trade which has a cascading impact on your trading day. You lose faith in your setup, move your stops early, exit trades early, skip amazing setups… the list goes on and on.
This is where I personally had a lot of issues in trading. It is SO easy to get caught up in a million technical levels. It can’t be that easy right? There has to be some secret code or group of indicators that I have to follow that I’m missing… I know the feeling. I had to create an approach to get me to leave the friggen’ trade alone. Get it set up, get it ready, prep the orders, and then let the trade play out. To do this, I had to adjust a few of my drawing objects to be very minimalistic.
Along with making things easier to see and ready (and work with for that matter), it’s also very important to go through your trade plan and ween any unnecessary steps. Extra indicators you don’t need anymore but had there as a visual crutch… (Yeah, I’m lookin’ at you).
Here’s the thing; the more steps we add to our setup, the more comfortable we feel BEFORE the trade actually takes place. It’s a way to give us an artificial sense of the warm fuzzies. The problem comes up when you are trading live markets and they are screaming all over the place. You can’t go back to check your 15 different oscillators, there isn’t time for that. Instead, we need to really make sure the indicators we are using are worth the space they take up on our screens. That is incredibly valuable real-estate and should come with heavy scrutiny. If it doesn’t help the trade or setup or strategy, it’s worthless. Get it gone.
Prune your strategy down to the bare minimum you need to execute the trade reliably. No extra distractions or indicators that you don’t need. Sure, they may come in handy for back-testing, but don’t expect them to look anything like that in the heat of battle. Once you have your charts locked down to the necessities, it’s time to practice and train your patterns and strategy. You need to understand your trading strategy like the back of your hand. Where the entries are, why they are there, where the stops are, why they are there, the trade probabilities, R:R to the setup, etc… They all have to be smack at the top of your head to call upon when needed. Without it, you are setting yourself up for failure.
Remember the old adage, KISS — Keep It Stupid Simple. The simpler your strategy is, the easier time you will have as a trader following your rules and strategy flawlessly.
Stay safe out there, keep those stops in play, and let the winners run!