Overtrading is a little-known but often overlooked problem for everyone in the business, but especially day traders and scalpers.
Lots of new traders feel the need to be constantly in the market and making trade after trade after trade, whether they are accumulating losses or wins. This is such a common error. Here are some approaches that often lead to overtrading:
- Failure to outline a clear strategy or daily/monthly objectives
- Constantly having their eyes on charts/order books
- Lack of patience
Not only this, but If we look at the psychology side of things, fear, excitement and greed are strong inputs that can lead to overtrading.
If you recognize yourself as someone who is guilty of one of these inputs, you may be diagnosed as an overtrader.
So, how should you avoid it? Obviously, you should aim to be the opposite of the previous points, but not only that!
People always think they will miss an opportunity if they do not trade on it, with every candle going up or down. For them, any volatility is a chance to earn a profit. If this is you, change your way of thinking! Those opportunities may result in losses too!
Be patient, write down your plans and goals, respect them, and wait.
If the market goes in a certain direction that needs to be traded, then let’s go, it’s your plan. If not, stay away from trading!
Another way to think about it is side markets. For some weeks, the market cannot choose a direction and lots of traders try to force a trade. Most of the time, by the time the market wakes up, it’s too late.
What to retain: Be patient and humble. The market ALWAYS gives you a heads up to extract some value. Don’t force it to give you this value!