Are You Suffering from Analysis Paralysis?


Analysis paralysis is when you analyze every small move, compare with a long history of movements, use many indicators and put them away, and basically just analyze over and over again, without placing a trade for ages. Here are some things you can do.

If the answer to the question in the headline is Yes, then you can relax. There are worse things you can do as a trader, such as look for posibble setups when they are never there. But are you here to analyze charts, or to trade?

Analysis should be serious, but not never ending. Once you have a trading system that you use, implementing should not take too much time. Market conditions either justify entering a position or staying out. 

If you are not sure, it is better to stay out. Playing it safe is more important in case you are not sure. You might be seeing something that is not there, as aforementioned.

But if you are sure, don’t look for additional indicators. It would be wise to recheck the conditions for one more time, just to make sure. After this validation, it is time to dip into cold water.

You have a system that you have tested, market conditions meet your system, and you have double checked it. Go for it!

But if you check over and over again, you might miss the chance and enter when it is too late, and then lose their money. Some just keep on testing, examining, retesting, etc. If you are into forex trading just for analyzing the charts, then you won’t lose money. But aren’t you here to make money? You probably are…

Some traders hesitate and begin changing the basics of their system. This can be even worse. At least it isn’t during an active trade, something that happens to many.

Remember that 3 indicators can be too much. Adding too many tools may confuse you and keep you away from trading. Two is also fine.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

1 Comment

  1. Day Trading Systems on

    I agree, “You have a system that you have tested, market conditions meet your system, and you have double checked it. Go for it!”. “Some just keep on testing, examining, retesting”, is avoiding biting the bullet. It is important to test and prove a system on a simulator for a decent amount of time, but when that has proved successful, get to the next stage which is placing trades and dealing with the emotions and making sure you are trading it the same way you tested it and not wasting time trying to over engineer the process.