Trading is a decision making profession – every day traders are forced to make decisions. We either have to choose between instruments we are going to trade or simply choose not to trade at all. Its quite a simple binary profession that is hopefully governed by some form of structure that guides your decision making and keeps you as far away from the actual decision as possible.
However, there are some traders who never get around to trading – there are even clubs full of these individuals who never get to around to trading. They talk about about what they would gave traded and the mechanism by which they would have arrived at their decision but they never actually get around to doing anything. In part I think this inertia is called by a phenomena called Fredkins Paradox. This paradox states that when you have to make a choice you spend a given amount of time mulling over your choices. If one is a stand out winner then the time taken to reach a decision is small. However, if the two options have minimal qualitative difference between them then that amount of time spent deciding between them will begin to grow out of all proportion. The paradox arises because as the alternatives begin to merge the effect they will have upon your life will shrink.
So how does this affect our traders who never get around to doing anything. Consider your archetypal technical trader – they will spend inordinate amounts of time deliberating over whether their moving average should be 15 or 20 or perhaps its should be a mixture of Fibonacci numbers such as 13 and 21. This thought process will go on for often years as they wrestle with this sort of problem all the while not realising that it is largely an irrelevancy. Since it is an irrelevancy the impact it will have upon your trading is minimal but the amount of time it will absorb will grow and grow until you get nothing done.
This sort of decision making problem not only afflicts traders but enters into almost every decision we make. We all undoubtedly see people who are vapour locked in a supermarket aisle because they cannot decide between almost two identical products. The impact of this decision on their life is irrelevant but the amount of time taken to arrive at it is almost comical.
Trading is a simple profession for all its notions of complexity it reduces to a simple series of decision. Buy something or dont buy something, havng bought it decide to hold it or dont decide to hold it. It is not actually that hard yet we seek to make it much harder than it should be.
How do you do that.
It is like you are in my house and trading room watching me every minute.
And this year has been really difficult. I nearly pulled the trigger several times. But then it was like some whispering to me. Don’t do it.
Not yet. The markets are all over the shop. Take a breather and keep watching.
Was that you?
I need to be like that Nike add…… Just Do It.
Maybe tomorrow. Dam this is frustrating.
I agree with Adrian, this is a hard thing to do, commit your hard earned money to a trade. How do we overcome this?
Even using a demo account doesn’t fix the problem. A method for working through this is needed. Does anybody have a solution?
The method is having a trading plan that tells you when to pull the trigger. One example is a breakout system with a moving average. Accept that you will not win every time but keep going. Analyse each trade and go again. The thing is if you don’t enter the trade and undergo the journey, you won’t let the market teach you the lessons you will need to be successful. Grit and kahunas are necessary ingredients, money is not the only thing you win or lose here.
All the best, you’ll be right.