What is over-trading?

12 June 2016, 08:08
Sherif Hasan

Over-trading is one of the most common trading mistakes many forex traders make.

This post will explore over-trading and provide you with some tips to help you overcome this destructive emotional trading problem.

If you don’t know you’re over-trading you probably are, in-fact most traders who are not making money consistently in the markets are over-trading.  The main problem with over-trading is that it can be difficult for a trader to know if they are doing it or not because it has many different ways of “sneaking” up on you.

For example, it is very easy to become fixated on a less-than-perfect trade and forget about your trading plan which will make you not consciously aware of whether or not you are over-trading.  Also focusing on smaller time frames with often tempt many traders to take positions they would have otherwise not taken had they been focused on the higher time frames like the daily chart.

Another example is taking additional trades just because your current trade is in profit, and you’ve moved it to break-even? Was the additional trade really valid or did you jump the gun because you were feeling excited about your first profitable position?

Due to the fact emotion-inducing situations can occur in the markets, it can be hard to identify when your emotions are working against you.

If you really want to stop over-trading you are going to have to realize that less is more in Forex.  Unfortunately many traders come in to the market with the opposite attitude; more is better.  Aspiring traders tend to think that more trading is better, more indicators are better, more analysis is better and more hours spent in front of the charts is better etc.

However this is definitely not the case and you need to understand this if you want or stop over-trading. Spending too much time in front of your charts induces over-trading because you will over-analyse the nearly limited amount of market variables which will end up “manifesting” signals that aren’t actually there.

Obviously, in the beginning of your trading career you’ll need to spend more time with the markets because you’ll need to learn and master your strategy, but once this is done there really is no need to sit in front of your charts for hours trying to “figure out” what’s going to happen next.

The best thing to do is follow your trading plan, master your strategy and follow it with discipline.


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