{"id":89142,"date":"2016-05-11T14:14:25","date_gmt":"2016-05-11T18:14:25","guid":{"rendered":"http:\/\/countingpips.com\/?p=89142"},"modified":"2016-05-04T14:15:08","modified_gmt":"2016-05-04T18:15:08","slug":"how-to-avoid-overtrading-in-the-forex-market","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/05\/how-to-avoid-overtrading-in-the-forex-market\/","title":{"rendered":"How to avoid overtrading in the Forex market"},"content":{"rendered":"
May 11, 2016<\/div>
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By Admiral Markets<\/b><\/p>\n

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Dear Traders,<\/p>\n

No way that you have never experienced overtrading from being overly confident right?<\/p>\n

Like me – your answer is probably that you have.<\/p>\n

And most likely it was when you first starting trading, because experienced traders will have already worked this out…<\/p>\n

…they wouldn’t still be successful if they hadn’t.<\/p>

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Overtrading is one of the worst<\/em> enemies a trader can face.<\/p>\n

And experienced traders will have already worked this out – otherwise they wouldn’t still be<\/p>\n

You will find many definitions for overtrading – from trading too often in a short period of time, to going way above your risk limit threshold.<\/p>\n

In my opinion, overtrading is a term coined by the weak minded who trade with emotion and are looking to place a label on their failure.<\/p>\n

But regardless of the definition, most day traders have to deal with it and develop the discipline to overcome it if they want to survive in the Forex industry.<\/p>\n

But for others the fear of losing money can be a bigger problem, because it keeps them from pulling the trigger as often as they should.<\/p>\n

However, if you have a valid reason to believe that one setup is potentially less profitable than another – then there’s no reason to trade it.<\/p>\n

Additionally, if the market has exceeded some statistical range for the day:<\/p>\n

…then that could also be a valid reason to shut up shop…<\/p>\n

…though this should be reflected in the rules that determine the validity of such a setup.<\/p>\n

Obviously the market doesn’t care how many trades<\/u><\/a> a retail trader has made.<\/p>\n

Continue with overtrading and the market will slap you.<\/p>\n

It’s like the gambler who believes that his lucky streak is about to run out, so he pushes forward until he burns out<\/u><\/a>.<\/p>\n

Recognising the signs of overtrading is therefore critical to your trading success.<\/p>\n

Sure signs of overtrading<\/h2>\n

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The following list gives you an overview of overtrading warning signals.<\/p>\n

I suggest you familiarise yourself with these signals, so you can recognise them and learn to avoid them like the plague.<\/p>\n

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  1. After a few wins, you become overconfident.<\/li>\n<\/ol>\n

    You think that you are unbeatable, an absolute ruler of the Forex kingdom.<\/p>\n

    And you start taking trades immediately.<\/p>\n

    You forget all the rules.<\/p>\n

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    1. You have a losing streak or a few losing trades.<\/li>\n<\/ol>\n

      There’s an immediate sense of pressure to earn the money back.<\/p>\n

      You jump at any<\/em> opportunity that shows the slightest<\/em> possibility.<\/p>\n

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      1. You follow every<\/em> signal that your system gives you and forget about the basics of price action.<\/li>\n<\/ol>\n

        Instead, you unconsciously focus on less-than-perfect trade setups.<\/p>\n

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        1. If you do not trade often, you get impatient.<\/li>\n<\/ol>\n

          You turn on your impulsive side, start taking bad setups and stay in the bad trades longer that you should.<\/p>\n

          This leads to losing good opportunities and eventually you lose focus.<\/p>\n

          It becomes a vicious spiral.<\/p>\n

          The remedy for overtrading<\/h2>\n

          What follows is a short subscription to remedying overtrading.<\/p>\n

          This prescriptive list is not from a medical doctor:<\/p>\n

          …but it will help save you from making impulsive or emotional trades\u2026<\/p>\n

          …that will eventually destroy your investment.<\/p>\n

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          1. Develop a trading plan with a clear and concise journal.<\/li>\n
          2. Review all <\/em>of your trades each day.<\/li>\n
          3. Wait for pullbacks<\/u><\/a> instead of adding too much to a trade.<\/li>\n
          4. Find a distraction like TV, social media or a dvd – it doesn’t matter what you do, just take a break.<\/li>\n
          5. Listen to Binaural Beats.<\/li>\n
          6. Learn to read the noise (more on this in the video below).<\/li>\n<\/ol>\n