Analysis Is Not Trading

Trading Is Easy, Trading Psychology Is Hard

Making Pips is Easy, Making Money Is Hard

common sense in trading may be far more important than I first thought. This being the case, let's look at analysis.

We look at our charts and we do our analysis. When do we know our analysis is complete? It is the same question an artist asks himself when painting a picture.

We sometimes get so wrapped up in analysis that it over rides what we use it for in the first place. I used to enjoy the analysis more than I enjoyed the trading UNTIL I realised that it didn't make me any money.

ANALYSIS IS NOT TRADING

Analysis should only be used for decision making. When you have arrived at a decision, your analysis is done. The second you go back and review your analysis, you will question your analysis and any confidence you had in putting on that trade has just flown out of the window.

If you have come from Indicator Land, you know what I mean. I still see systems and methods with indicators up the ying yang saying and wait for this to confirm, while this shows this, while at the same time this is below this, and this is pointing up, and this must have crossed before this has gone below etc., etc. By the time you have done all that, your head is so messed up, you have forgotten your kid's name!

Analysis is not trading. It only gets you to a certain place.

Trading and trade management is where the money is made.

Analysis does not allow you to forecast or predict or filter or reject. It is just statistical theory. Performing additional or extra or more or further analysis does not get you any further than your initial analysis and does NOT increase your chances of a profitable trade. Based on my earlier over analytical work, I can safely say that LESS is MORE!

Probability of profit in trading has NO RELATIONSHIP to the amount of analysis. Quality of analysis, yes, but NOT quantity. Therefore, no profit will ever increase with additional analysis. Conversely, no probability of loss will ever be decreased by performing additional layers of analysis.

Once in a trade, there are only 2 actions you can make to increase your profitability in trading. They are as old as trading itself and you will have read them many times:

CUT YOUR LOSSES

Your plan should identify your SL but just in case you decide to over ride it (are you reading, Dan?) - cut your losses as soon as possible

LET YOUR PROFITS RUN

Governing, dominating and over ruling these 2 actions are EMOTIONS.

We always ignore the training we need in trading psychology in our quest for profits.

I repeat what I posted earlier - profitable trading is 10% method, 90% psychology. Ignore the psychological side and it will tear you up. If you haven't experienced it yet, it is waiting around the corner for you - it is always there, waiting for you, no-one can hide, it WILL find you out!

I won't say anymore on it as Nicola is going to kindly share her experiences with it.

If you have read and understood my posts, you will have read that I said my flash analysis of USDCAD was more accurate than my detailed analytical over kill. You should also have read that Baba G, our Professional trader and Money Manager, makes his decisions and trades just by LOOKING - not a chance of over analysis from him!

What has this to do with common sense - EVERYTHING

Our common sense, "our gut feeling" is the best decision maker we have.

Look at Baba G, common sense told him to pull out of his CADJPY trade and he is a PROFESSIONAL TRADER & MONEY MANAGER.

If it feels right - it is RIGHT


If it feels wrong - it is WRONG

When we are choosing our lifetime partner and soul mate - do we analyse? do we over analyse? Hell NO, we see it, we like it and JUST DO IT!

Trading is no different

TRADING IS SIMPLE - IT IS TRADERS THAT MAKE IT COMPLICATED

LESS IS MORE

Source: Here