Trader’s Paralysis: Stuck in the Details

trader's paralisis

trader's paralisisWhen traders first begin to put together their own strategy, it can be very easy to get so caught up in optimizing every little detail that they forget to actually trade the strategy. This is even true for traders who are simply implementing popular strategies. I spent many years attempting to become a CANSLIM trader, and I second-guessed whether every one of my trades was correctly following the system.

David from Signal v. Noise wrote an interesting post that reflects on this concept earlier this week. He explains that people who create things reach a point where perfecting every last detail produces diminishing returns. At some point, their time would better be spent starting a new project.

He also cautions against the market you are producing for moving away from you:

You can make the best, most polished, least-defective saddle out there, but if the market has moved on from horses to cars for general transportation, it’s not going to save your business.

Seth Godin also talks about this idea in a number of his books. The buzzword that he uses is to “ship” your product. His view is that your creation does no one any good until you put it out into the world.

Both of these concepts have clear application to the trading community. As traders, we want to create the perfect strategy that performs well in all market conditions. No matter how well our strategy performs, we are constantly looking for new ways to improve it. At some point, those improvements simply are not worth the effort.

This revelation smacked me right in the face in December of last year while I was conducting a podcast interview with Tom Basso. Tom basically told me that I was wasting my time debating between different moving average lengths and that I should stop worrying about those details. He helped me see that I just needed to pick a few rules and put together a system, then trade that system.

Traders are faced with a never-ending line of potential improvements that they can make to their strategies. Don’t let those ideas overwhelm you to the point where they impact your trading. It’s better to be trading an imperfect strategy than to spend your life worrying comparing hypothetical improvements.