Technical Analysis - Information Overload

Technical analysis in trading is probably one of the easier skills to master within all the aspects of Forex trading. Finding a trading strategy that works for you and that you can manage is the simple part.

What on earth? How can you tell me that when I’ve been struggling for months on end or years on end and I’m still not consistently profitable?? – don’t worry, I understand the struggle. Trading the Forex markets is a journey. However, it does not mean that we don’t add to the journey sometimes when we decide to do our own thing and complicate our lives.

What do I mean by that? Well, sometimes we overthink the process of trading. Analyze, conclude, enter, or don’t enter, use proper risk management, etc. But we’re often stuck on the analysis part right? Because we’ve been listening to all the famous and successful traders on social media who trade for funds, investors, or even bigger; those who trade for institutions!

But, here is the thing about those traders – they spent their time on what worked and never tried to complicate it or change it because someone else told them it wasn’t going to work. They decided on a strategy to use, they learnt the ins and outs of it, but more importantly, they learnt themselves.

They became self-aware of the type of person they are because it affects your trading. Your character influences the way you trade more than you may think. So do your emotions. Too often traders look for mentors and partners advice, analyzing the person’s success but not the method the individual uses, and what makes that trading style work for the person they look up to. Let us discuss why this matters. 

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Why can emulating someone cause issues?

Now the problem with this is you only take one aspect of the traders’ way of looking at the markets and not their personality. For example, you may be a very conservative risk-taker, whilst the person you are trying to imitate is very aggressive and so the setups they look for may not be the ones you’re comfortable with, but because the person makes a killing in the markets, you decide to follow blindly…

You then decide that the strategy doesn’t work for you and so you try a different trader’s strategy. You try it out for a couple of months and find that it’s on and off. You’re losing money. You’re making money. But still somewhat losing more than you make. This causes you to think that the STRATEGY needs adjusting, but does it? Does it really? Or do other aspects of trading need more practice and effective implementation??

Here is what happens when the new traders, or even those who have been struggling for ages now, feel that the strategy is not making them consistently profitable – they add to the strategy!!! WHY???!!!!!

THE PROBLEM IS NOT THE STRATEGY! The problem may be that you aren’t disciplined or that you are using that strategy incorrectly. Maybe there is more to that strategy, just that you haven’t dug deep enough. Mastery is found in detail, it doesn’t need any additions.

Sometimes we traders over-complicate our trading so much that we start adding unnecessary trend lines, channels that aren’t even channels, indicators, tools, and other crazy stuff that 1. Were NEVER part of the strategy to begin with and 2. That you need to spend time learning before you use it. What exactly do I mean by this?

Is this good technical analysis?

If I had to ask what is wrong with this chart, what would you say??

There are way too many indicators I can barely see the actual chart!! Now some may laugh but it’s information overload. You get to a point where you know so much about the markets and you know so many strategies that you are overloaded and don’t know which strategy to use. Some may even try all of them, or even worse – add them together and just have one big mess.

Another problem with having information overload in the technical analysis aspect of trading is that your brain cannot choose one without being commanded to, so when you see an opportunity, your brain may look at it and believe that the opportunity is invalid because according to another strategy you learned previously, that same set-up is the opposite to what you believe.

Indecision causes you to not take the opportunity and you know what? You may have lost out on a profitable trade, that starts a whole new journey for you.

So in closing; 1. Stick to the strategy and work on the aspects surrounding the strategy, know it inside and out. 2. If you chose a strategy, work with those who trade the same way until you’re settled. 3. Learn to trust your own analysis of the markets because trading is not a team sport. It’s you and the markets.


Happy trading!

Seek mastery within the detail!

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Emmanuel Maphosa

Emmanuel Maphosa

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