Winning the War Against Analysis Paralysis

Why is it that in life, people go off and decide to jump out of planes, or swim with sharks, but when it comes to trading, they get bogged down in information, battle the dreaded analysis paralysis, and have so many second thoughts?

Table of Contents

Case-in-point: Can you believe this guy willingly decided to go be swallowed whole by a giant anaconda? Talk about not letting an abundance of information, or fear and indecision get the better of you! I don't even know what to say about that!

  • Why paralysis should not happen in trading

  • How you can filter the noise and focus on the winning trades

  • Understand how you can be your own worse enemy - let those talents shine!

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Why we struggle with analysis paralysis

The reality, though, is that most of us are better at using incomplete or imperfect information in our lives than we are in our trading. And while it's probably because money and reputation are on the line, analysis paralysis, indecision, and missed trades creep in as a result.

That' exactly what we're trying to prevent here, and the hope is that by identifying some of the more seamless decisions we make in our lives every day, we can then carry over that same clear thinking to our trading for more clarity, better execution, and improved results.

There's no room for analysis paralysis on the road

No Room for Analysis Paralysis on the RoadDriving is an everyday task for the vast majority, and something that feels like second nature to us by now. Driving is more than just physical aspects such as steering the vehicle and managing its speed. You are required to perceive and process information, make decisions, and react. Like markets, there's no room for analysis paralysis while driving! Instead, we make decisions very quickly. Often this is using only the information we have readily available at that very moment.

What we don't do is sit there in traffic, indefinitely weighing all the options and pondering our next move. This is because we get nowhere fast while sitting idle and drowning in information. Anyone engaging in scalping will not have time to be indecisive.

Why markets are similar

That kind of analysis paralysis can happen quite easily in the markets, though.  Overcoming it doesn't mean simply throwing risk out the window and just going with it. If you've first been mindful of risk management, and all the conditions you look for are in favor of your decision, then act according to your trading plan. This can be whether that means turning left onto the highway or going long in the markets.

See also: Trading Rules No Disciplined Trader Will Break

Somehow that seems easier when driving and more difficult when Forex trading. Yet in the fact the same calm, focus, and decisiveness you exhibit each day in the car is exactly what you need to bring to the markets. Try thinking of that while you trade. You will then see whether every trade decisions become easier and analysis paralysis becomes less of a threat.

The Psychology of Imperfect Information

Psychology of Analysis ParalysisI studied the following lesson in a psychology class years ago. That was before I even became a technical analysis traders, but now when I think about it, I see how it applies so well to the markets. Yet another way simple trading imitates life, I suppose! Anyway, we face situations like this one in our lives all the time, both literally and figuratively, and it really represents trading in a nut shell: Inevitably, we come to a point where we can't see the road ahead. So, what do we do?

Well, this is one of those times when we face imperfect information, yet we always manage to proceed in spite of it. When literally facing this exact situation, we have no way of knowing at the time if the road continues around that corner, if it ends altogether, or if hidden obstacles are looming just out of sight. However, we more than likely do not let the lack of information stop us in our tracks.

How see clearly in an imperfect situation

In the markets, though, sometimes we do let it stop us. As a result we go off in search of additional information. Often to the point of analysis paralysis and self-sabotage.

That's the cycle of thinking we're trying to break. The above lesson is very real proof that we can. After all, it is in our very nature as humans to carry on in spite of limited or imperfect information.

In the markets, that means trusting our Forex strategy and the validity of the trade set-up. It's only when we choose to fight our strategy, and in essence, go against our very nature, that we tend to run into problems with analysis paralysis. And in that case, it's our choice, not our natural predisposition, to go out unnecessarily in search of more information.


We are all living and trading in an information age. Quite ironically, too much information, or analysis paralysis, is a very real concern. It causes confusion, can lead to disastrous losing trades, and makes proper trade execution almost impossible.

The good news is that humans, by nature, don't require complete or perfect information in order to make decisions. What we have done here is take a closer look at some everyday situations where we actually excel in spite of it.

Definitely give this some thought next time you have strong technical signals. and feel like you need additional confirmation!

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