Too many indicators - analysis paralysis

Too many indicators on charts lead to conflicting signals. Imagine you have 10 different indicators on your chart. One says: buy, another: sell, and yet another suggests: wait. Your mind becomes overloaded, and decisions become chaotic. Financial example: Let's say you lost 200 zł on one trade because you trusted an indicator instead of looking at the bigger picture. Over the course of a month, there can be many such losses. The second mistake is over-relying on indicators at the expense of simple rules like trend lines. The third mistake: not understanding how each of the indicators you use works. It's like trying to fix a car without basic mechanical knowledge.

Overanalysis leads to decision paralysis, which can result in not making any trading decision or making the wrong decision. The more information you have, the harder it is to make rational decisions, as each indicator can give different signals. It's like trying to drive a car when every passenger is telling you how to go - one says to turn left, the other to turn right. As a result, you stand still, missing investment opportunities.

Assume you have a capital of 10,000 PLN. Due to conflicting signals, you lose 2% on one order, which amounts to 200 PLN. Assuming you make 5 such losing trades in a month, you lose a total of 1,000 PLN. Over the course of a year, that's as much as 12,000 PLN, which is more than the initial capital. If you add to this the costs of slippage and spread, the losses can be even greater. Slippage is the difference between the expected price and the price at which the order is actually executed, while the spread is the difference between the buying and selling price.

Here are some practical actions you can take:

• Use a maximum of 2-3 indicators that you understand.
• Focus on indicators that complement each other, e.g., RSI plus moving averages.
• Analyze historical data to see how a given indicator performed in the past.
• Ignore small fluctuations, concentrate on the overall trend.
• Instead of indicators, learn candlestick pattern analysis.
• Create a trading plan and stick to it, but be ready to modify it if something clearly isn't working.

Every day for 5 minutes, analyze the charts without any indicators to better understand the market.