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Lee Bohl on Analysis Paralysis

Lee Bohl shares ways to deal with the massive amounts of market information available.

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Well, I think one psychological challenge that especially new traders face is what we call analysis paralysis, and I think what that means is new traders, maybe not so confident as experienced traders, they want a lot of confirmation of their ideas. So they search for it, and I think they find pretty quickly that there are hundreds of websites that give opinions. There are trading systems. If they look at a chart, there's hundreds of indicators in the public domain that they can put on the chart, and I think what they're looking for is all of them to line up, sort of like the stars, you know. And what happens is that that never happens. There is no holy grail in trading. So I think what you have to do is think about just a couple of tools that you really understand, get to know them intimately, and then just use the signals on that.

But it has to be tools you understand. For instance, there is an indicator called the Super Bowl Indicator, and it attempts to say what the market's going to do based on who wins the Super Bowl. I couldn't use an indicator like that 'cause I just don't understand how it's going to work. So use fewer indicators or ideas to confirm your trades.

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Important Disclosures

Past performance is no guarantee of future results.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

Schwab does not recommend the use of technical analysis as a sole means of investment research.

This discussion is provided for illustrative purposes only, and should not be considered an individualized recommendation or personalized investment advice. The strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction for his or her own particular situation.

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