Secret 91AVOID ANALYSIS PARALYSIS
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The mathematical nature of the options game in combination
with the unpredictable nature of stocks and futures and vast
resources of the internet can create a large trap for the option
trader. Many traders suffer from information overload. They cannot
decipher the good information from the bad information, and
they get lost in the trees.
Many investors overanalyze to the point that they are unable
to make a decision. Many technical analysts get lost in the jungle
of statistics of the price charts. That is why there are so many different
opinions about the same stock or futures price action.
Try to keep things simple. Stand on the sidelines instead of
in the middle of the jungle. Take a lot of the information with a
grain of salt. Remember my 60% rule in Secret #15. When it
comes to option traders, decide on the important input and ignore
the other details.
For example, concentrate on the delta, probability of hitting
your target, implied and historical volatility, and theoretical
value. Don’t get lost when doing your analysis, and don’t consider
numbers to be printed in stone. Also, avoid using too many
analysis programs and too many option advisory services. Too
much information can be as dangerous as too little.
Try to keep it simple, and try to develop a simple consistent
methodology that suits your personality and style. Of course, a
simple methodology takes practice as you get comfortable with
the type of trades and analysis that you find successful.
The mathematical nature of the options game in combination
with the unpredictable nature of stocks and futures and vast
resources of the internet can create a large trap for the option
trader. Many traders suffer from information overload. They cannot
decipher the good information from the bad information, and
they get lost in the trees.
Many investors overanalyze to the point that they are unable
to make a decision. Many technical analysts get lost in the jungle
of statistics of the price charts. That is why there are so many different
opinions about the same stock or futures price action.
Try to keep things simple. Stand on the sidelines instead of
in the middle of the jungle. Take a lot of the information with a
grain of salt. Remember my 60% rule in Secret #15. When it
comes to option traders, decide on the important input and ignore
the other details.
For example, concentrate on the delta, probability of hitting
your target, implied and historical volatility, and theoretical
value. Don’t get lost when doing your analysis, and don’t consider
numbers to be printed in stone. Also, avoid using too many
analysis programs and too many option advisory services. Too
much information can be as dangerous as too little.
Try to keep it simple, and try to develop a simple consistent
methodology that suits your personality and style. Of course, a
simple methodology takes practice as you get comfortable with
the type of trades and analysis that you find successful.