I have been asked several times lately by new traders how to overcome the fear of placing trades. Just today, I received an email from someone saying that they had alerts set for $JOEZ, $SCEI, and $KERX, saw the setup, but couldn’t quite pull the trigger. The setup worked just as they planned, yet they missed the trade. I never had this problem. In fact, as I have said before, I had quite the opposite problem! However, having talked to a lot of traders, I do know a little bit about this topic. So per the email that I received today, I decided to write this blog and discuss a little thing known as ‘paralysis of analysis’.
The term “paralysis of analysis” refers to over-analyzing (or over-thinking) a situation, so that a decision or action is never taken, thus paralyzing the outcome. Paralysis of analysis occurs in all parts of life, not just trading. Perhaps you have a great idea for a new social media site, but you don’t know how to go about getting started. You don’t know how to get the patent, or how to recruit investors for your idea, or whatever. So you are stuck, basically paralyzed and at a standstill. You will never be succesfull and never fulfill your dreams if you don’t figure out how to overcome this fear. Being paralyzed is great for new traders because you want to take the time to learn before placing trades. You cannot blindly follow a trader and expect to make money. You have to know the concept behind the trades and understand why the trade is being placed if you want to be truly successful. However, once you have taken this time to learn then how to do you muster up the courage to actually push the “buy” button and put your plan into action? Well…..