Common Mistake: Overtrading

Almost everyone will have to go through this “need” to trade. The trick is to get through it quickly with awareness that you are doing it. It’s certainly not a bad thing to overtrade when you are using a demo account and still learning/creating your trading plan, but once you go live and start attempting to become a professional trader you need to make sure it is out of your system.

Just like the common mistake I wrote about in my previous article, this is another one of those things that people will do no matter how many times they hear and read about it all over the Web. The fact is that if you follow some very basic price action concepts with good trade management and risk/reward you could have several solid trades per day. Other people may consider this overtrading but if you are following your plan correctly based on the “zoom level” you are watching then it is not a problem. An important note here is that a trading plan with 2-3 trades per day requires more experience and skill to remain profitable than a trading plan that gives you 2-3 trades per week. The further out your “zoom” the cleaner the picture.

The problems begin when you start taking trades outside of your plan because you are bored or you convince yourself you see a setup that isn’t really there yet, you jump the gun you might say. Awareness is key here and avoiding it completely as a newcomer may prove difficult. Just try and remember this piece of advice and catch yourself when you do it and don’t let it happen again.

I have a very solid price action concept that can be traded on various levels but as I stated above you need to make sure that you are following your plan, not how many trades you are taking. If you are trading a plan that averages 2-3 trades per day and you are taking 2-3 trades per day you probably are not overtrading. If you have researched your plan to the level that you should have researched your plan, based on your historical data and statistics you will know what this average number is. If you are trading a plan that averages 2-3 trades per week and you find yourself trading everyday then you are clearly overtrading and need to work on your discipline.

I know this all sounds very obvious and I certainly don’t consider this an innovative article but what is obvious to some is not always obvious to others and my goal with these Forex articles is to just make sure these simple elements of trading are not lost, especially for those just starting out.