There are critical moments in trading where timing is everything. When all the signals are in line, you can’t hesitate, second-guess your trading plan, or wait for further confirmation. If you wait too long, you’ll miss a major market move. Unnecessary hesitation can turn a winning trading plan into a loser. Unfortunately, there’s no fail-safe way to know when to take decisive action and when to prudently wait until market conditions are optimal. Nevertheless, traders who hesitate too frequently, and often suffer from analysis paralysis, show a few key symptoms. For example, they dwell on their mistakes and over-think their options. Make sure you don’t show the signs of an indecisive trader with poor timing.
Perhaps the main reason traders don’t take timely action is because they dwell too much on their mistakes. It’s important to learn from one’s mistakes, but many times there’s only so much you can learn from a losing trade. If you failed to manage risk, had a poorly defined trading plan, or impulsively put on a trade, then, by all means, don’t make these mistakes again. Fix the problem as soon as possible.
There are other times, however, that a trader does everything “right” and accounts for all possibilities, yet an unforeseen factor undermines one’s trading plan. In those cases, there’s no need to over-analyze such past losing trades. There’s little you can learn, and you’ll probably do nothing more than shake your confidence by repeatedly reviewing the trade. It’s better to build up your confidence by fearlessly making trade after trade. Extreme self-reproach will just use up your limited psychological energy. Nobody’s perfect, and even the most “perfect” of traders will face losses occasionally.
Throughout our lives, we are taught that prudent decision-making requires careful deliberation of all possible options. It’s not a good idea to impulsively put on trades on a whim. On the other hand, too much deliberation uses up limited psychological energy. When you spend time and energy tediously reviewing your options over and over again, you don’t have enough time and energy left to make a precise trading plan. It’s sometimes better to decide which trading opportunity to take and then immediately focus your remaining energy on specifying every part of your trading plan, such as entry strategies, exit strategies, and risk control. Don’t be wishy-washy. Decide which opportunity you want to take, specify a detailed trading plan, and put on the trade in a timely fashion.
It’s vital for trading success to show discipline and self-control, but it’s also essential to execute trades in a timely manner. When you spend too much of your energy mulling over past mistakes or unnecessarily pondering your options, you end up wasting time and energy that is better spent outlining a trading plan and executing it. Timely action will ensure you stay profitable, so don’t hold back, take action.