Issue: October, 2006

Frozen in Analysis Paralysis? Use Volume to Break Through the Ice
by: Todd Krueger

As traders, we have a plethora of choices regarding our individual approach to trading the markets.

There are dozens of variables that go into trading, including, but not limited to, the style of trading that we adopt (day trading, swing trading, position trading, options trading), the markets that we trade (stocks, futures or forex), the time frames to trade in (1-minute, 5-minute, 60-minute, daily, weekly, etc.) and the tools we use to make our trading decisions (fundamental analysis, technical analysis and/or volume spread analysis).

Feeling Overwhelmed?
With all of these choices to make, it can be very difficult to figure out what is truly important to achieve the goal of successful trading. It is very common for inexperienced traders to feel overwhelmed and succumb to the detrimental “analysis paralysis” syndrome in which they tend to overcomplicate the entire trading process by rationalizing that if one indicator is good, then two must be better and if two are better, then four must be even more accurate in predicting what the market will do next. Unfortunately, this line of thinking leads many traders down a long, frustrating and most often a losing path in their trading careers because they are focused on the wrong areas of the trading spectrum.

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