When I take quick gains instead of letting them run, I suppose it gives me an immediate feeling of being a winner. ( I can easily see where this can be associated with addiction) I got a fix, feel better, let me see if I can get another one now. Also there is some fear of 'being wrong' - losing money going on in my head. My overtrading seems to be more prevelant on days that I start out losing. I tend to let my winners run better when I am already in the green.(not always) I believe that a combination of fear of being wrong and addiction to the feeling of being right, is where I am when I get into my "get it quick before it's gone mode". SwiftTrade, I shorted the drop this am (Wed. 7th) from NQ 939 ish to 903ish, about 7 different times on the way down for 11.5 pts gained. I was down 8.5 pts to begin with because I shorted the open and lost 6.5 real quick on the opening pop. Then I reversed and went long and lost two more. My point is that once I had been stung and got my emotions up and running I went into grab the points and run mode. My first short after the turn was at 934.50 and moron me covered 932 for + 2.5 and played it that way all the way down. When I could have remained calm and "Disciplined", by following my trade with a trailng stop, managed it halfway well and made at least +12 points to the first little snap back at about 10am @922.50. Instead of discipline and riding down for a possible trade of 34 pts or more on one trade. (or at least 12 on the first leg) I made 11.5 total between 934.50 and 900 which put me at +3 (having been at minus 8.5 from the first ten minutes) and after commissions I was still 'net red'. So in order to avoid the pain of losing I managed to create losing by not taking advantage of what the market was offering me. ( When I was sitting in a great postion!!!) So I still ended up calling myself "BONEHEAD" Ended the day with 20 round trips and 20$ net positive after commissions. Like rs7 said, I can't do it for long and inexpensive. I don't have a great solution to correct this behavior except to recognize it and grit my teeth and work hard at keeping my finger off the exit trigger when the trade is running green. Sometimes I do make some decent plays for longer moves. But I get into taking profits too quickly, a whole lot more than I should. My lack of discipline usually comes from my own pain avoidance, and often the end result is more pain. I'm working on it and getting some better at it, but lately have been doing too much overtrading. I know it's all between my ears because I can papertrade real well. But when my $ is on the line.......my fear, all too often gets on the line too.
Make no more than 20 trades a day If you start out or at any time have 3 consecutive losses..quit for the day If you have a greater than X amount of loss on one trade...quit for the day Lengthen your time frame, reduce your size, increase your stop. Move your stop up when the trade is in your favor... exit only for a GOOD reason OR if your stop is hit. Continue trading all day if you've been real profitable. You don't need to make many trades to be profitable. You do not need to scalp to make GOOD money. #1 rule to implement is this. Start a comprehensive trading journal. Write to yourself, describe your psychology for the day. Why did you do X, and was the Y result the one you intended? Remember this: There are only 2 reasons why anyone loses money in the market. 1). A new problem arises for which their plan has no solution..they must amend their plan and in so doing they must lose money while it is being fixed. 2.) They do not follow their plan Those two reasons assume a profitable plan to begin with. If your plan is profitable you should be consistently profitable if you follow it correct? If you are not consistently profitable then your plan is not profitable OR you are not following it. Figure it out.
Here's what I do. End of day I printed out two copies of the day's chart. On the time frame I'm trading off of I carefully, acurrately marked every trade with dots for entry and exit and a line connecting the two. Red for losers, green for winners wether the trade was short or long. Then on the longer time frame chart I marked where the real trades were that day. After a week I decided which one of those hamsters running around in my head had to die. I took the charts from a particularly egregious day to kinkos , had them blown up on nice paper and then expensively matted and framed. They're side by side above my monitors. I have to look at them all day long.
I used to be just like swift. I grabbed 5 cents and felt great - until I saw the price run up another 75 cents w/out me. At the end of the day I made a grand, the broker 2. I figured any time the broker made more than I did and I'm the one busting my balls - something has to change. I removed the tick and 1-minute bar charts and now trade only off the 5-minute. I also ignore the first 2-3 bars of the day since that's a classic reversal period that'll do nothing but get you stopped out. There's too much market noise on those 1-minute bars for my style. I'm now a long-term daytrader - anywhere from 5 minutes to 6 hours and I'm a lot calmer (and more profitable). Trends are much easier to see on 5-min charts than 1's. Just my 2 ticks' worth.
Try exiting only half your position when you get the urge, then re-enter at better price on those shares. This way, if the stock doesn't retrace, you still have half your position to ride the move further. This is a simple strategy I use whenever I get that uncontrollable urge to exit, eventhough I know there's probably more upside. Tony
Only enter trades where you're looking for big moves (i.e. 1/2 pt. and more) either short or long. Look at pre-market gap ups/downs and look for uptrending stocks to fade the gap down and vice versa. Look for market stocks to break down or breakout after consolidation periods, depending on what the futures are doing and the time of day. Scale into and out of positions but trade around a core so you can catch more of the move. Don't trade (or trade VERY lightly) between 11:00am-2:30pm. Loosen your stops a bit so you don't get shaken out all the time but keep your initial position light so you won't panic out of it. Add onto the position on strong stocks during pullbacks and use moving averages to determine reasonable stops and profit taking points. Remember to sell into the up move (no one ever went broke taking profits) but don't put stock up on the inside offer when you see alot of high bids! Once you hit your profit targets for the day, take your foot off the gas and slow down or stop trading. Keep your volume at 50K or less a day and make sure you can average at LEAST $30 per every 1000 shares you trade. Now do this every day for the rest of your trading life and you will be a rich pimp daddy!
to add to the excellent commentary on this thread: Sometimes overtrading can also be caused by thinking that we're smarter than we actually are; or put another way, we neglect the luck/noise/trend factor portion of the trade. Our first daily trade is usually well thought out, but as the day progresses and we have a few profits under our belt, we tend to loosen our criteria or pattern setup, feeling we are invincible, and that's when the crap hits hard due to a combo of having increased size and relaxed stops or some such insidious combination. I try to step back after each id trade, and simply and visually go over the progression of events to see what caused these particular results. This has the benefit of slowing me down purposely, and gives me (subconsciously)time to review other things happening outside my narrow trading/charting perspectives.(not practical for scalpers of course). I have found that the short time missed in id analysis/review has helped me immeasurably in my final daily bottom line. Anyways as Rasche is wont to say, let the trade come to you, don't force it, wait for your setup, otherwise do NOTHING.
finding the right trade is the best way time spent in bad trades kills profits i trade more than 50k shrs before 10:30 so i do not think capping volume will help it is waiting and watching for a good trade to come along and then hitting keys what does volume have to do with it i trade more when good trade are there and less volume when it is slow be picky and that will make you money