You take a trading course and are all upbeat and motivated to become a millionaire in 3 weeks, so you speed every minute of the day doing analysis placing tons trades without a strategy will lead to over trading.
Over trading in forex is one of the issues that many traders suffer from and it hinders their growth and I don’t just mean there trading accounts but as traders. Some traders can spot when they are over trading and pull back others cant, its like they are addicted to the game. If you know anyone with a gambling addiction you know that over the long haul they are just not profitable. When a beginner first starts out in trading they all think more trades will equal more money. Is it a logical thing right? Wrong… The truth is, overtrading can lead to sloppy trading and mistakes. The temptation to be always in the market affects a lot of traders and cause them to overtrade. If you are overtrading and don’t realize it, it may cause serious consequences. Hunting for trades will lead you to get sidetracked from your trading strategy and if this happens your risk to reward goes out the window for a ball of chalk.
Once you recognize you are overtrading, it will be very easy to overcome it. Overtrading is not really much different from gambling. When you gamble, you just do it without any plan, strategy or an idea in mind. Similarly, when you throw your hard earned money in the market without a solid trading strategy or plan, you most likely have a tendency to overtrade. Here are three signs that tell you that you are overtrading.
1. You are Hunting for Trades
You analyze a chart with a couple of technical indicators or strategy and you do not find a clear signal that tells you when to buy or sell. You change to a different indicator or strategy/time frame and you still do not find a signal. You think that if you keep switching indicators or strategy something must come up. Stop and Evaluate your mindset and stay focused on your strategy. The fact is, that you are not really trying to find a good trading opportunity; instead, you are finding a way to justify your desire to place a trade.
2. You Feel Like You Are Missing.
There will be days where you cannot trade or be in front of the charts, do you feel that you are missing out on collecting those pips? If yes, then this is a good sign of overtrading. If you feel you are missing a good trade when you are not in front of your desk or have your phone on you, then you will most likely place a trade as soon as you get access to your trading platform. If you feel that you should be placing a trade as soon as you open your trading platform, then this indicates that you might be overtrading. A good trader never feels this way and can wait all day for the right trading opportunity according to his or her strategy.
3. What if you don’t know that you are Overtrading
If you don’t know whether you are overtrading or not, then probably you are. How do I say that confidently? Because almost all new traders overtrade until they understand what overtrading is and how to identify if they are overtrading. Overtrading is the most common mistake that Forex traders make. The markets will be there Monday through Friday every week of every year and there will always be an opportunity to trade and make a lot of money.
Tip on how not to overtrade
If you do not want to over trade, try this, do all your trading analysis on a Saturday or Sunday and pick 3-5 currency pairs to trade for the week that you think according to your analysis and strategy will be winners. Do not deviate from those 3-5 currency pairs. If the setups come then trade them if they do not then you don’t trade. Stick to your trading plan and you will 1. not over trade and 2. you will grow your trading mind and your trading account.
The reason a lot of people get into trading or want to become forex trader is mainly to have the time to do other things. Yes, the money you can make is a huge bonus but when you look for the right setups and execute the right trades you do not have to spend all day in front of your computer. You can place the big trades confidently knowing that you have done your due diligence correctly and enjoy the freedom that forex trading can give you.