Dealing with Analysis Paralysis

aralysis is the inability to move, act, or function. Usually, we refer to this in the physical sense, but it’s also very common in trading, typically occurring when a trader runs through so many different outcomes in their mind that they find it impossible to make a final decision or prediction.

One of the main reasons this occurs so frequently in the financial markets is because many who are new to technical analysis (reading a price chart) tend to focus only on finding the “pattern” or the “signal” vs. learning how to perform analysis & make solid predictions. (Creating a directional bias).

Creating a directional bias works as a filter for your trading & if done correctly will allow you to pick a given direction to focus on. Once you’ve decided on the given direction or the path of least resistance, then the “pattern” or “setup” becomes important, but only if aligned with your directional bias.

Your directional bias is your opinion on future movement which stems from your ability to understand what the price chart is telling you. Sounds simple, but as I mentioned before, most newer traders don’t work on developing this skill because they don’t see how it directly relates to them taking trades in comparison to a specific pattern or setup.

Hopefully, this article has provided you with an idea of how it does & if you’re more of a visual learner & want more on this subject, I highly recommend watching the video above for more insights.

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Trader — Trading Coach — Host of The Trading Coach Podcast — Author for Entrepreneur & FX Trader Magazine — Proud Husband & Father — Sports Nerd & Coffee Addict