Over trading?

Discussion in 'Trading' started by Indie Cator, Sep 16, 2002.

  1. Many people seem to cite over trading as one of the big no no's for a new trader.

    How do you define over trading? I don't mean in numbers, but qualitatively - what makes a trade one too many?

    Thanks wise ones!

  2. I think the number one issue for a new trader is to learn the ability to take a quick small loss when the trade does not go as expected. This seems to be the hardest lesson to learn. Put another way, the ability to close a trade as readiliy as one is opened.

    Once this is mastered, then whether one is overtrading has a lot to do with the style one is attempting. I would say, if you look at your trades, and cannot remember why it was opened (proper research etc), what the criteria for falure/stop was, how it performed vs expectation, (or cannot identify these by style or method), then one is trading too much, especially if capital loss is not controlled, or discipline is not followed consistently.

    But if trades are made on a consistent basis, with good research, discipline and capital control, and hopefull profit, then they probably are not overtrading. I say this because the items I mentioned, if done correctly, should keep a limit on trades made, because doing them correctly takes time and effort.

    A new trader should keep a log of all this stuff, even a "what was I thinking" notes for open and close. It's a lot of work, but should help identify weaknesses more quickly. The real problem is usually in the mirror.
  3. Overtrading is what they call it when you lose money.

    No one ever complains about too much profitable trading.
  4. One other important thing I forgot to mention:

    If one is taking a string of losses, then one should slow down or even stop untill it can be determined what is wrong.

    So to put it simply, is the trader in control of himself? If not, he is overtrading.
  5. Pabst


    It sounds like a cliche, but fear and greed cause overtrading. Greed causes one to start out on a trade with too big a number on, trying to get rich quick. An always tempting proposition if you've been trading well with smaller size. "If only I'd had on more!!"

    When one fears a loss, for whatever reason, it may even be at the time an inconsequential loss, the risk of adding is always a clear and present danger. The term "rogue trader" was coined to describe the phenomona. Funny thing is, those who are most greedy, are also the most fearful and the least respectful of what she might do!
  6. Miki


    In my case the overtrading was always due to unsuccessfully chasing a successful revenge after a large loss.
  7. Trend Fader opened up my mind to making your weakness your strength. If you are fighting your susceptability to overtrading, there is a way to incorporate it into your strategy.

    Simply put, if you are not a calm and rational trader (like someone I know) don't try to trade a calm and rational system. Look for a system that has you constantly trading for revenge.

    By the same token, if you are having trouble pulling the trigger, maybe the system you are trying to use trades too much.

    When you are fighting yourself, it's like fighting the whole world.
  8. My definition of overtrading is this: Is each trade you make entered according to your system? Different setups occur more frequently than others so the number of trades varies. If you are taking trades that fall outside of your guidelines you are overtrading. If you have no guidelines you are definitely overtrading.
  9. As a rule of thumb, if your commissions are more than 50% of your gross profit, you are probably overtrading.

  10. prox


    Overtrading is continuing to trade after a string of losses without re-evaluating what you've done and if you've violated your system.
    #10     Sep 17, 2002