Is Information Overload Drowning Your Trading Success?
Information and knowledge can only take you so far in life and in trading. Everything has a saturation point where “more” stops being better, and this is very true in trading. You can hit a mental saturation point in trading, this is the point where you’ve absorbed all the trading theory and knowledge that you need to trade effectively, and by taking in more knowledge / information / training beyond this point you are actually hurting your chances of trading success. Think of your brain like sponge, a sponge can only hold so much water before it gets saturated, and once it’s saturated there’s no point in putting more water into it…you need to start using what’s inside the sponge (your trading knowledge) instead of pointlessly trying to pump more into it.
Knowing what the latest Non-Farm Payrolls numbers are (I have no idea what they were and I don’t care) is not going to help you become a successful trader. Knowing ten different trading methods isn’t going to help you either. Over-analysis is a very real and dangerous condition that dooms many trader’s careers because it causes them to second-guess themselves too much and question everything they do, unnecessarily. This condition is present in many other professions as well, not just trading. It’s why all great athletes regularly consult with psychologists, especially golfers and tennis players where the prize money is huge.
A good trader gone bad…
Meet “Bob”, Bob is a member who I helped via email, his story is probably similar to many of yours, I’ve changed his name to Bob to conceal his identity per his wishes.
Bob was doing very well after learning my price action strategies, he was making slow but consistent gains each month in his relatively small trading account. However, I noticed that he was emailing me a few times a week asking about different economic reports and what their implications “might” be for specific markets. He was also sometimes asking me about different trading strategies and trading systems and as time went by I quickly realized that Bob was doing what so many other struggling traders do; he was shooting himself in the proverbial foot. Bob, like so many other traders, was his own worst enemy in the market, and he was slowly but surely defeating himself after a string of excellent trading.
What was going on inside of Bob’s mind as he was transitioning from a good trader to a bad one? Simply put, Bob was trying to force unnecessary ‘water’ (information) into his sponge (his brain) when it was already at the saturation point. This was causing him all types of different problems, some of which will probably sound very familiar to you:
- Bob was becoming distracted by too much market related information and data
- His confidence was slowly declining as all the extra variables he was trying to absorb began to conflict with each other, causing almost constant doubt and uncertainty about whether or not he was taking the right trades and what to do after he entered them.
- Bob was convincing himself out of good trades and into bad trades, again this was from trying to absorb too much data like economic reports and other news variables, as well as the differing trading methods he was trying to use simultaneously.
- He was mismanaging trade entries and trade exits as doubt began to permeate his mind and failure to trust his ‘gut’ trading instinct started to take hold.
The point you should take away from Bob’s story is this: you can reach a point in your trading knowledge and understanding when learning more trading theory or absorbing more economic news is simply going to be counter-productive. Think about the analogy of the sponge that I described above; a sponge with too much water is useless, once you have the right amount of water and soap in the sponge it’s time to start cleaning. Similarly, if you don’t start using your trading knowledge and skill you will eventually reach a point where learning more will start to create stress, doubt and uncertainty, and these things are clearly not conducive to long-term profitable trading.
Stop thinking, start doing
Knowledge and theory are great, but without practice and experience they are nothing. Most employers are looking for “experienced” candidates first, if they have the knowledge and theory that’s great too, but experience trumps everything in basically every profession in the world, including trading.
With everything in life, trading included, there comes a point where you simply need to stop learning and start doing. Experience is something you really can’t ‘learn’, you have to let it build up naturally, it’s like a very valuable commodity and the more you have of it the better.
You obviously need to first achieve a certain level of trading proficiency, and this involves learning and mastering an effective trading strategy like my price action method. However, once you achieve this proficiency it’s time to start getting some real-world trading experience and close up the ‘books’. Taking in every news event, trading strategy, every bar on the chart, over-thinking and over-analyzing market data will start to actually undo all the time and hard work you put into learning and mastering your trading method in the first place. In this way, continuing to take in market data (news variables and other trading methods / systems) can and will destroy your all your efforts at becoming a skilled trader.
Imagine you’re learning to sky dive. In the early stages, you need to jump tandem with a trained professional sky-diving instructor. However, you can only do this for so long if you want to learn to jump on your own. Eventually, you need to learn to trust your gut and be content in knowing what you already know and what you’ve learned from your instructor, everything after that point simply becomes a distraction and is inhibiting your progression as a sky diver.
Similarly, in trading, you can learn to trade from an experienced trader like myself, but after you’ve obtained the knowledge and mastered the trading concepts, it’s time to ‘take off the training wheels’ and start trading yourself. Nothing can replace real-world trading experience, that is to say actually analyzing the market and placing / managing trades. You have to learn to trust your knowledge and trust your gut in trading, you cannot continue to tread water by thinking that there’s “more to learn” and once you “learn it all” then trading success will magically be yours. At a certain point, once you’re proficient in an effective trading strategy, you’ve got to just say “it’s time to roll” and start applying your knowledge to the charts and stop trying absorb more data and theory.
Do you think yourself out of good trades and into bad ones?
It seems to be a part of human nature to want to cloud our minds with conflicting data and make things more complicated than they need to be, humans are addicted to this type of behavior. A joke I often tell to beginning traders is: “Thinking. It’s bad for you.”, and what I mean by that is that traders literally ‘think’ themselves out of good trades and by doing so they also ‘think’ themselves into bad ones, in essence, too much thinking IS bad for you. You need to have the discipline to stick with what you’ve learned and be content in knowing one method inside out and really mastering it, and you need to stop trying to absorb more and more market data and variables.
How many times have you found what you felt was a ‘perfect trade signal’ and you set up your order but right before you pulled the trigger you went out and started looking for news items or trolling through trading forums to try and get further ‘confirmation’ of your trade idea? What inevitably happens is that you find another guy or girl on a blog or forum with the complete opposite view on the market you were going to trade, you are now confused and you delete the order for the trade setup you were just so confident in. This is how many traders sabotage their trading and second-guess themselves, it’s addictive and it just won’t help you at all!
Another example is letting an opposing trading strategy convince you out of a trade that makes perfect sense in the context of your primary trading strategy. This is why you should only focus on one strategy and it’s also why you should stop trying to look at other strategies because they will probably contradict your current one and you’ll be left with nothing but confusion and frustration. You obviously need an effective trading method, but once you have one there is no point in pursuing other methods. Finding an effective trading method is not the difficult part of trading, the difficult part is sticking with one effective method.
Finally, I want you to imagine yourself in a white room, it’s totally clean and minimalistic, and you have a single chart open on your trading platform with nothing on it but candlesticks. You’ve totally removed all the clutter from your trading environment, your trading platform and your mind, you are calm, confident and relaxed. This is how you need to start each trading day, maybe not in a ‘white room’ with nothing else in it, but you catch my drift here.
I actually want you to be arrogant about ignoring news data, other trading methods and anything outside of your trading plan; turn a blind eye to what the rest of the world is saying and just focus on the strategy you’ve mastered. The first step is learning an effective trading strategy that you can build confidence in and eventually master, to get started, checkout my price action trading course for more.
26 Comments Leave a Comment
Just what i needed! Thanks very much for sharing the information.
Thank you sir very much for this useful article.
Before coming to LTTTM, I used to watch major news in FF forum. I made all kind of mistakes stated in this article. After coming here, I stopped reading news. One of the best trick, I learned from Nial.
Thank you for teaching.
Thank U sir,
for such a wonderful artile.
Sounds like I’m bob I have done this so many times my trading act is a fraction of what I started with. Nice article now time to apply this article and brain wipe lol
Nial, you have just fixed the the trading puzzle. thanks a lot.
Nial, Excellent post, too bad you and I both know that even though some will read this and say “wow, he’s right!” They will continue (like I did for a looong time) to search/try, search/try, and search/try, only to one day (hopefully) figure out that they need to stop searching and just DO!
Great Article, I needed this…
Thanks Nial. The lesson today for me is “in the act of doing”. Your weekly articles plays an important role to my trading discipline. Inspiring!
That is an extremely powerful lesson
Thank you Nial, just what I needed!
Great article Nial … just what I needed to read … cheers!
perfectly said and timely! There is NO-ONE like Nial Fuller to put it so clearly and simply.
a very insightful article. Thanks
That is a very neat succinct article which is just so true.I am on target now for a new little lap top and a coffee bar That is my trading world and it works
Many thanks you do some great stuff
best wishes happy trading Pete
Absolutely on the mark!!!!!!!!!!!!
I think we all go throught this personal trading evolution process. I have.
It is almost that we have to sabotage ourselves to learn or fall into failure and despair.
I only trade Price Action Pin Bars as taught by Nial.
I have 8 months of trading profit journaled and recorded.
Thank you Nial
Good lesson looking forward to your weekly reports.
Spot on Nial…
Great reminder article to keep things uncluttered both in mind and chart…
This is, undoubtedly, one of the Master Nial’s OUTSTANDING ARTICLES ! Lot of stuff to learn from this.
THANK YOU, SIR.
Good article Nial,
So true and to the point! I find my trading improves when I ignore FX News websites and just stick to my own system and methods!
Thanks for the advise Nial. From now on I’ll stop thinking, just follow my trading plan and completely ignore the news. I’m one of LTTM newest rookie member.
The KISS method, wins every time, good article, thanks Nials.
Hello Nial, I love your idea of being ‘arrogant about ignoring news data’. However, the feeling is strange, because it seems that as a trader you SHOULD know what is going on in the Forex world, I mean: news and fundamentals. But honestly, it was always a big noise for me. Thank you for liberation from this.
Hey Nial…(LTTM member) another great article you have written for me that is actually me.
Good trading all
An article very close to everyone trading success. thankyou
This is a very nice advice from a proffessional like you sir, I love it thank you very much for ur hardwork
Good lesson and well written article. Thank you!