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Do you have trouble pulling the trigger? Do you doubt your decisions, or close out a trade before your trading plans come to fruition? Do you over-analyze data and end up missing a major market move? How many profitable trades have you missed because you have frozen at critical moments? If you answered "yes" to any of these questions, you may have a problem with analysis-paralysis.

Putting your money on the line can be hard at times. It's understandable to want to occasionally avoid putting on a trade. There are many reasons that traders may have trouble taking the jump and risking capital to make a profit. Behavioral economists, for example, theorize that when one has many attractive alternatives, it is hard to choose among them. You can become paralyzed trying to decide which opportunity will provide the most profit.

Other traders try to avoid responsibility. They secretly doubt their talents. In an attempt to avoid seriously looking at their chances of success, they try to block it out of their minds. Rather than take the plunge, they look for reasons to avoid making a decision. They may procrastinate by analyzing and reanalyzing data. Sometimes, procrastination reflects a strong need for perfection. The rationale is that if you can trade with perfection, all uncertainty will be removed. But you can never be certain that a planned trading strategy will produce a profit. In the end, you must be willing to take the risk of losing money. No trading plan is foolproof, and trading always involves some risk.

How do you avoid analysis paralysis? Realize that you don't need to be perfect. Accept your limitations. You're not perfect. So what? No one can be perfect. You're human. Mistakes are part of being human. When you remember this fact, you'll stop procrastinating and start taking action. Also, keep in mind that you don't need to be in complete control. Ease up. You can't control the world. You can't control the markets. The more you can accept uncertainty, the more you'll feel free and active. Look for symptoms of analysis paralysis, and when you see them, work on changing them. When you see yourself over-analyzing, for example, stop! Although analysis is important, too much of it can prevent you from taking action. There's a point where you have to stop deliberating about whether to make a trade and just do it. Again, accept the fact that you can't be perfect. You will be wrong sometimes, but that's all right. Don't get stuck. Do whatever you can to take action. Just like taking a shot of caffeine in the morning to get you moving, it's sometimes necessary to give yourself a punch in the arm to start trading. If you have trouble moving forward, trade with small positions, and risk only money that you can afford to lose. If you make smaller trades and reduce the possible downside of losing, you'll feel calmer. And when you feel deep down that you have little to lose, you'll be able to get yourself moving again, and take an active approach to trading. Winning traders are active. They know that their odds of success are increased by making more trades rather than less. When you are calm and free, you'll be enthusiastic about trading. Such enthusiasm will keep you moving forward.

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Tuesday, 23 July 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.