- The issue for the novice trader is that there is so much stuff out there that doesn’t work they can lose a lot of money finding out what works for them and what doesn’t. And unfortunately there isn’t any way out of the analysis paralysis. It can often be a case of one step forward and two steps back. Information overload is a real issue for novices. One has go through – or shouldn’t avoid – the process of learning. It’s the filtering that counts. My technique was to find people making money and try and do what they did. Consistency was important to me. No use someone saying they did one thing one day and another the next…how was I to determine how they were making their money. It took time but in the end I found who and therefore what I was looking for. These days I’m happy to listen, happy to share but I’m also happy with what I do and am not looking to change until it stops working for me.
- I don’t think you stop learning and in doing so you move from losing to winning and from winning to winning more as you refine things. Also the psychology for trading a few quid on a couple of swing trades is completely different to that when trading a six or seven figure portfolio. I found that once I was consistently making serious money I kept looking for ways to do it more profitably and with less risk and fewer emotional issues. That process continues and I suspect always will because that’s what I enjoy doing. The act of finding something new and beneficial (or should I say the process of trading) gives me as much satisfaction as actually making money.
- It is worth noting that fundamentals and technical analysis work best when used together. To do that effectively requires a great deal of learning which I sometimes think we take for granted. Sadly for the novice trader before they can find what works for them they also have to find out what doesn’t work for them. You will never know when you’ve finally arrived. That’s why I believe trading is a process where you never stop learning. I see no alternative.
- Also, this may help someone else, I once read a book (sorry can’t quite remember what), but a quote which stood out to me was something like… Compare the money and time you are spending to going to university to learning how to be a doctor or a surgeon or a pilot… I know I would be doing the world more good probably as a doctor, surgeon or pilot (but never thought for long enough that I can achieve this), but when I feel do I really want to trade shares – I can’t think of anything else I could do and enjoy just as much (most of the time anyway)! So I spend the money and the time and hopefully I will make the grades…
Learning to Trade: Information Overload and Analysis Paralysis
Good article, thanks!