Paralysis By Analysis

When too much information is amassed, a person is unable to internalize pertinent data necessary for rapid fire decision making. When one is unable to process the mass amounts of information, inaction occurs.

Common Problems:

  1. Not prioritizing
  2. Confusion
  3. Postponement of decision making
  4. Bad judgement
  5. Time mismanagement
  6. Lack of critical thinking
  7. Feeling psychologically stressed and overwhelmed
  8. Working hard, but feeling behind

Common Causes:

  • The delusion of a infinite range of possibilities to make money.
  • Insistence on completing all analysis before initializing action.
  • Too many variables all at once causing incessant revisiting of original signal.
  • Lack of daily objectives.
  • Choosing quantity over quality
  • Increasingly conflicting trading methods.
  • Creative speculation, that is, you can outguess the guessers.
  • Big Project Syndrome: this system will do it all, will use the latest tools, will use a new paradigm, will start with a clean slate.
  • Risk avoidance, fear of making a mistake.

Viable Solutions:

  • Keep trading system simple. Never integrate varying styles. Building a bigger model doesn’t add clarity – it creates confusion.
  • Do enough analysis to convince yourself the odds are in your favor – and then stop!
  • Refuse to review technical complexities, instead, review working functionality. If you’re not seeing simplicity in trading system design, move on.
  • Start your system design with one requirement based on sound principles, i.e, an architectural prototype. A trading system without a prototype is like a candle without a wick, which is how analysis paralysis really happens.
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