Chapter 5
Information Overload

“Dave, this is Brian. You gotta come over here and check out my new set up.” Brian is my neighbor and he started trading about a year ago and like so many of us he has struggled to keep his head barely above water. We were talking a few weeks back and he was telling me he was gonna have to stop trading and get a second job to catch up his mortgage and car payments. Brian was trading part time and working full time and losing his butt. Sound familiar ? Anyway, he sounded like a kid in Junior High with a new girlfriend on the phone so I told him I’d scoot over there right now. I figured he had bought one of those 60 inch plasma TV’s with the Dolby® surround. I was kinda excited too because now I could watch my NASCAR races at his house !

Brian’s office/den/playroom is a converted basement with an entrance off the driveway so I let myself in. “Hey man, where you at?” I heard him holler through the closed door “in here Dave” so I open the office door and there it was. Holy freakin’ shit ! Un_freakin_believable ! Brian’s father was retired from NASA and I thought surely they had set up a space shuttle command center. There were at least 2 computers that I could see and one, two, three, four, five, six monitors ! Every monitor had some kind of chart running in it. I saw time and sales windows, market breadth, TICK, TRIN, VIX, BANK, TRAN and on and on and on. Brian was smiling like a rat in a cheese factory.

Now at this point, I’m really confused. Just a few weeks ago Brian told me he was gonna have to stop trading and maybe get a second job to catch up his mortgage and car payments because he was losing so much in the stock market. Now I’m standing in his “office” looking at a 6 monitor set up that looked like something you’d see on the floor of the New York Stock Exchange. Ok, there’s only 2 possibilities here. Either Brian made a ton of money in the stock market last week or he wanted 6 monitors so it would be easier to see how much money he was losing. So I asked him what the deal was with all the new stuff. His reasoning was that he could trade better if he had more information and for that he would need more monitors. Well, me and Brian had a “come to Jesus meeting” and Jesus wasn’t there ! For those of you not familiar with Southern terminology that means we had a really heated discussion LOL !

How many monitors do you have, at least 2, right ? If you have more than 2 monitors, please answer the following question with a simple YES or NO. Since you added monitor # 3 and beyond, have you started making money rather than losing it ? Ok, see how easy that was. You can have a hundred monitors and a water cooled computer made by IBM but if you don’t have the right mindset and the basic understanding of what you’re doing you will continue to lose money. Information is necessary but I believe you can have too much information.

Let’s say you are trading the S&P or NASDAQ E-Mini futures and you’re watching not only the actual futures chart with at least 3 moving averages plotted, the MACD, stochastics, volume, open interest, RSI, ADX, CMF and Keltner channels but you’re also watching charts of the VIX, TICK, TRIN, BANK, TRAN, the bond market, the dollar, the yen, the euro and on and on and on (yes, people really do this). How in the heck can you make a decision when to take an entry or exit ? Let’s think back to the days of Jesse Livermore, some say the greatest trade that ever lived. Livermore began his trading career trading in bucket shops with nothing but a primitive ticker tape and futures prices that were hand written on a chalkboard. Now let me say this because I know some very successful traders who use a lot of indicators (Yes, you are one Trisha) but they have years of experience and they have found what works for them. But on the other hand, my first mentor, Bob Turberville, can scalp the heck out of the market with nothing more than a time and sales window (tape reading) and a volume indicator. You have to find what works for you but if you’re still losing money all those indicators and monitors are just gonna jumble up your mind. At the very beginning of this e book I said I would only recommend 1 book for you to read and here’s the link to it. The book was written in 1923 and everything in it still applies today. I can’t stress how important it is for you to read that one book !

Myself, I use 1 computer and 2 monitors to trade. The only reason I have a second monitor is so I can watch my charts on one monitor and look at e mail, StockTwits, etc on another monitor. If my second monitor blew up today it wouldn’t affect my trading at all.

Anyway, I guess that’s enough on information overload so we’ll wrap this chapter up. Remember, keep your trading as simple as possible and don’t clutter your mind with a bunch of charts and indicators that you don’t even know what they’re telling you anyway !