It used to be that people would only ever meet a small number of people in their lives relative to today. Dating pools were much smaller, there weren’t choices like we have today, an entire library of potential mates. Turns out though, that when we have too many choices, we actually end up unhappier than if we had fewer. What are some of the consequences of too many choices? Well for one, it’s easy to pick apart all the negatives, and think that there is always something better out there. Once we make a decision, we start to have buyer’s remorse so to speak, and start to imagine all the things that could have been had we chosen differently. In fact, if you allow someone to choose between 50 chocolate bars, their satisfaction with the one they ultimately picked is actually lower than if you just give them one as a prize.
Whether it’s dating, chocolate bars or stocks, too many choices can cause more anxiety, less satisfaction, and ultimately more negative internal responses.
Do you ever have a watchlist of 50 tickers and it seems like you end up missing all the plays? Do you jump from indicator to indicator trying to find “the one”? The options nowadays are endless, and so is analysis paralysis and FOMO. So, what can you do? Well luckily sometimes our brains are complicated as well as simple. Sometimes, we can create the environment we need to almost trick ourselves. In the case of stocks, we can do this with some preparation. First thing we need to do is dwindle down our watchlists.
For example, when the markets are all moving together, everything is essentially a plain chocolate bar - they will all act similar enough. So we can already recognize that there is a good chance by just picking some indices to play, we won’t miss too much. By picking out the stocks you will play either at the start of the week, or start of the day, you can vastly increase your chance of success. Speed date through the tickers, quickly rule out all the ones that you’re not attracted to, then focus in on the ones that catch your eye. Don’t worry about what attracts other people, for they are not you. Give yourself a time limit to find your tickers.
Endless amounts of analysis will start to have diminishing returns in both money and satisfaction - people who try to maximize every aspect of the information they have in front of them, statistically end up feeling less satisfied than those that are called “satisficers”. Satisficers instead go ahead and make a decision once the required number of criteria are hit. For example, if you have a rule guideline for taking a trade with 7-10 criteria, and the trade hits them all, you don’t start looking for reasons not to take the trade, or look to another trade. You simply execute and then move on.
Over time, when people simplify, they report less anxiety, and more satisfaction in their work. Cutting through all the excess requires preparation - but this work you put in now can vastly improve your satisfaction, happiness and overall success.
- Define your trading edge.
- Write down your criteria for entering.
- Narrow your tickers to those that meet your setups.
- Ignore the noise.
Your brain will thank you!