Indecision and paralysis trader

Indecision trader born in a situation where methods conflict with each other, and he has difficulty with the choice. These problems are relatively easy to solve.

There may come a situation where the methods is clear, but the trader for any reason, no reason, verily shall act in accordance with them. This situation is much more difficult, and different rules of behavior are usually not helpful.

Intelligence + emotions = problems

We can say that the problems are intelligent trader indecision and matters paralysis always emotional in nature. Under the intellectual, I mean that the trader is usually just does not have sufficient information to make an objective decision when conflicting methods.

Look at this in a real example. Suppose we use the trading strategy a combination of two methods: moving averages (Moving Averages, MA) and the levels of Bollinger (Bollinger Bands, BB). At the same time as the main signal we use "reflection MA from BB (areas A, B).

And now we are faced with a situation where MA comes to BB, but instead of reflecting it moves in one direction.

There is a clear contradiction of methods. Direction MA clearly points to buy and finding a MA from the top line BB - on short selling. And then there is associated with this contradiction indecision. Resolve this indecision is simple enough. We need to attract another "arbitration" method or rule. In our case, it may be the following rule: "If the approach to the BB MA will not change direction, but, on the contrary, BB begins to follow the direction of MA, - it is a signal to open a position in the direction of movement MA. In applying this method of resolving conflict rules, and the trader can make a reasoned decision. Problems indecision trader best resolved more in-depth study of the methods, their interactions, and the underlying factors of the market, which are the basis of the methods used. From the above example immediately follow a few simple lessons drawn.

1. The less time the methods used by traders, the less chance of a conflict of methods.

2. The less time the methods used by traders, the less the need for additional rules of conflict resolution.

3. "Arbitration" method should be used only for items 1 and 2.

And one general conclusion. The best strategy - a simple strategy. Do not forget that any situation of conflict resolution methods, even as simple as in the example, always has a serious psychological burden on the trader and partly undermined his confidence in the chosen strategy. Secret desire of every trader - to develop a strategy that "worked in his place."

In other words, a strategy that would give the only unambiguous instructions at all times. Then the trader will only obediently follow the instructions of the system. It is very comfortable, as a trader as it does not take any decisions on their own and, therefore, is not responsible for the consequences. But let's move on from simple to complex, and turn to paralysis trader.