Do you do an awful lot of research into a market before you attempt to take a trade in it? Do you look at fundamentals and try to glean as much information as you can about the underlying? Do you feel that you are doing a more than adequate job of information seeking, but are still not as much as a breakeven trader? Are you beginning to feel that you are doing something wrong?
Well, it could be that you are suffering from information overload. It could also be that you are gathering information about the wrong things. People have a tendency to believe that the accuracy of their trading increases with more information. This is one of the illusions of knowledgeâthat more is somehow betterâthat more information increases your knowledge about something and improves your decision- making ability. But that is not necessarily trueâincreased levels of information do not always lead to greater knowledge. There are three reasons for this. First, people tend to interpret new information as confirmation of what they previously believed. You believe what you want to believeâyou are biased, even if you are not conscious of the fact. Second, some information doesn't help us at all in making predictions, and can even mislead us. Finally, we often do not have the training, experience, or skills to interpret the information correctly.
You have to closely examine the kind of information you are looking at and determine its real value to the markets you are trying to trade. I have seen traders keeping elaborate records of everything they are doing as they trade. They keep files full of articles and reference materials which they pore over prior to making a trade. But is all this really necessary? I doubt it. It is much better to trade what you see without having to find justification for every trade through research.
Well, it could be that you are suffering from information overload. It could also be that you are gathering information about the wrong things. People have a tendency to believe that the accuracy of their trading increases with more information. This is one of the illusions of knowledgeâthat more is somehow betterâthat more information increases your knowledge about something and improves your decision- making ability. But that is not necessarily trueâincreased levels of information do not always lead to greater knowledge. There are three reasons for this. First, people tend to interpret new information as confirmation of what they previously believed. You believe what you want to believeâyou are biased, even if you are not conscious of the fact. Second, some information doesn't help us at all in making predictions, and can even mislead us. Finally, we often do not have the training, experience, or skills to interpret the information correctly.
You have to closely examine the kind of information you are looking at and determine its real value to the markets you are trying to trade. I have seen traders keeping elaborate records of everything they are doing as they trade. They keep files full of articles and reference materials which they pore over prior to making a trade. But is all this really necessary? I doubt it. It is much better to trade what you see without having to find justification for every trade through research.
