Knowledge Addiction

Before I get started, I have to admit, one of my favorite things in trading is learning something new. I get a rush whenever I learn about a new method. I love learning new ways to do things. I view it as adding a new tool to the tool box.

Trading is like a Swiss Army knife, you never know which tool you’re going to need but you always want to be prepared.

Over the past few weeks I’ve been doing my due diligence and diving into some new topics in trading that I’d like to add to my skill set. I firmly believe that you should never stop learning, nor should you ever allow yourself to become complacent. But at what point does it become too much?

Recently, I’ve realized that whenever I learn something new, my performance starts to decrease and my trading takes a hit. Maybe it’s just me, but I have reason to believe that this is something that is common amongst many traders, whether they are aware of it or not.

This phenomena is know as knowledge addiction.

Knowledge addiction and workaholism are closely akin. A workaholic is a “person whose pleasure from learning things at work has become so extreme, that it indicates clear disturbances with his/her personal happiness, bodily health, and interpersonal relations, and with his smooth social functioning”.

In essence, knowledge addiction can lead to the number one killer of many good traders — analysis paralysis.

Have you ever felt like you were a better trader when you first started out even though you hardly knew anything? — Yeah, me too.

The reason for this is because when you were a beginner, your brain had less information to process before making a decision, i.e., executing a trade.

For example, let’s imagine the trading checklist for a beginner trader vs. the trading checklist for an experienced trader:

The point here is this — the more information you put between seeing a trade and actually taking a trade, the harder trading becomes.

Your addiction to acquire more and more knowledge is causing the gap between knowledge and action to widen. Which brings me to my main point —without action, you will never realize your goals.

The result ends up being that your brain has all of this excess knowledge/ data that eventually leads to decision fatigue, and you end up feeling overwhelmed.

You become stuck.

Unable to get yourself moving, you resort to more consumption. This can quickly become a never ending spiral if left untreated.

To break this cycle, you have to commit to replace consumption with action. There is nothing wrong with broadening your horizon, but you should always remember, it’s not what you know that’s going to make you rich — it’s how you use what you know that will make you rich.

Just because you know how to find support and resistance one hundred different ways, doesn’t mean you need to look for one hundred different levels of support and resistance. All you need is one. Keep it simple and avoid trading fatigue.

Trading is like a Swiss Army knife, you never know which tool you’re going to need, but you want to make sure you’re always prepared.

Thanks for reading.

Mr. E