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Information Bias
By Tom Long | August 8, 2007
It’s a common mistake among people to believe that the more information they have, the better and more informed will their course of action be. This is not true. At some point, more information will simply confuse instead of inform and your need for information is already saturated. This can be said among traders too. Too often I see traders staring at charts for hours with more and more indicators until everything is just a blur and they don’t feel wiser than they did an hour ago. This is why you should limit your analysis to just a few indicators at a time. Start by looking for patterns such as support and resistance lines. If we are close to such a line you can apply one or two other indicators to see if they confirm the line or not. If they do then you place a trade with a stop on the other side of the line and if they don’t then you leave it be. Placing another 5 indicators will not help you, it will only confuse you.
Tags: dollar, forex, forex news, forex trading
Topics: Don't Trade Like This |
August 9th, 2007 at 10:52 am
[…] The carry trade is a complicated proposition for anyone participating in the FX market. That’s why so many people get it wrong all the time, including those who make their living trading the currency. There’s so much information bouncing around the market, and traders are relying on fundamentals and technical analysis and have trouble deciding when different signals suggest different actions. As sacrilegious as it might sound, traders might actually be relying on too much information. […]