The effect of too much information

Author: Forex Live | Category: Education

Sometimes too much of something isn't always a good thing

KX
Ruining trades with too much information might look unlikely, but it can complicate the trades and end up in losses.

There is a distinct chance of getting 'information overload' or 'analysis paralysis.' To make it simpler, traders have far too much information to make a clear and accurate decision.

Though it sounds strange, too much information can overwhelm traders to the point where it makes them afraid to start a position at all.

The concept of placing a trade on is stressful enough, but if they have conflicting information, it can make things quite complicated.

Generally, when there is too much contradictory information, traders better stay out of the market.

It's much better if they are confident when they put money into the marketplace. However, that confidence in a trade does not mean it's going to work out.

In placing a trade, there is one thing to remember; it's important to focus on crucial information, not all information.

What Matters

Traders usually have issues as they tend to get sidetracked by all news articles, tweets, or rumors they hear.

Sadly, news reporters and people on social media commenting on politics or the economy typically have very little knowledge or expertise on the way the markets will move.

In fact, financial reporters are just that: reporters.

Their job is to show the news, not to offer their opinions. On the other hand, traders must read and analyze economic announcements.

But reading an analysis of economic announcements doesn't seem to count as reading the news.

Also, the trend is another vital thing to pay attention to. Trades must accept that when a currency pair is in an uptrend, it is so for a reason.

And it won't matter how right or wrong they think a news article is as price action is how they make money.

Traders need to read economic announcements together with trend analysis, not as a standalone piece of news.

And this is because economic announcements can change at times in their importance. And they must consider the overall trend of economic announcements for a specific currency.

Agenda

While traders dig through information, they should remember that everybody has an agenda. For instance, their brokers want traders to believe that there is a massive amount of money waiting at every given moment of the day.

With that, brokers publish news that they hope will push traders to action. And this is all because they make money on the spread, and every time there is a losing trade.

Do not allow a broker's news feed to be the only information responsible for the trade decisions.

Forums are another place where there's a lot of destruction done to people's accounts.

Unfortunately, when traders begin trading, one of the first things they will notice is that there are a couple of large forums that many people visit. 

Some common sense can go a long way when it comes to their conversations on these forums.

Also, they must think of these as entertainment and nothing else. If the old adage that about 90% of traders lose money in the long term is true, then that means at least 90% of the people in the forums are losing money.

If that's what is happening, then why would traders bother listening to their opinions.


This article was submitted by Kiexo.
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