Too Many Signals Will Kill You

In the wild world of trading, there's a silent killer prowling the charts: information overload.

Wait, but to make well informed trade entries and exits, you need to know every possible detail, right?

Technically, yes. More supporting information helps decrease risks associated with trading. But, unfortunately, our almighty brain has its own way with information overload.

Too many signals can mess with your head and result into poor trades.

The Illusion of Control

You launch your screens. There's a sea of indicators: moving averages, RSI, MACD, Bollinger Bands, and more. There are newsfeeds, X feeds, Discord chats. Each one promises to give you that edge. Sounds great, right? But here's the thing – too much information doesn't make you more informed. It makes you more confused.

Here’s what happens: When you're swimming in endless data, you start seeing what you want to see. That's what confirmation bias does. And everyone has it embedded into our biological operating system.

You’ve got an idea about a trade. You dive into your indicators. You scroll through the chats and feeds. RSI shows it's oversold and it’s a perfect moment to enter. CNBC says the market will bounce back. A fintwit guy on X is sharing a screenshot of his entry.

You notice all this, but you dismiss the red flags on your screens because your very own newborn idea has found three strong supporters on the internet. Your confirmation bias cheers loudly what a genius you are. His friend FOMO kindly reminds you that you have to enter right now if you don’t want to miss out. And there’s another lottery ticket purchased that you refuse to give up because the signals tell you what you want to believe…

The Problem With Too Much Information

When you're training a new AI model, you need as much data as possible to get the best possible result. Ironically, with the real intelligence — your brain — it’s the opposite. You need to protect your brain from information overload, otherwise, bad things will happen:

• Overanalysis: More data equals more time spent on analyzing, but when it's time to act, you're paralyzed by doubt.

• Noise over signal: With too many indicators, the real signals get lost in the noise. It's like ten friends talking simultaneously in a bar at a three-beer-volume.

• False confidence: You are programmed to notice what you agree to, because this makes you feel like a genius. But this consensus is often just an echo of your own biases, not the truth.

Remove More Than Possible

Have you seen the movie The Martian where Matt Damon has to strip literally everything from the ascent vehicle to reduce its mass? Fixing the information overload problem requires applying the same method. You just need to throw everything redundant away… and then a little bit more.

• Limit your indicators: Pick a few that you trust, that you've backtested, and that have proven their worth. Some pros only monitor a single indicator.

• Quality over quantity: It's better to have two reliable indicators that you've researched to death, rather than ten telling a story you want to hear.

• Shut down the news: Close the news feeds and social media when making trades. These both are designed to play your emotions. Which is exactly what you want to keep away when trading. If your trading strategy depends on some very specific type of news, limit your feed strictly to directly relevant news items only and remove everything else.

• Strategy only: Before looking at any chart, set your strategy. Don't let the charts dictate what you want to see. Instead, let them inform what you need to see.

In trading, less is often more. Too many signals can lead you down a rabbit hole where every trade looks like a sure win, but in reality, it's just setting you up for a fail. The market doesn't care about your beliefs, indicators, and goals. It's driven by big funds that get liquity from undisciplined retail traders.