Over Trading Is A Forex Traders Biggest Mistake
Over-trading is perhaps the most prevalent trading mistake that Forex traders make. This article will fully explore over-trading and provide some solid tips to help you overcome this extremely destructive emotional trading problem.
– Are you over-trading?
If you don’t know if you are over-trading you probably are. In fact, most traders who are not making money consistently in the markets are over-trading, whether they realize it or not. The problem with over-trading is that it can be difficult for the trader to know if they are doing it or not because it has many different ways of “sneaking” up on you without you realizing it.
For example, if you have committed to learning and mastering the daily charts first, do you still find yourself going and looking at the lower time frames more than you are looking at the daily charts? This is a very easy way to start over-trading. Traders who have
not yet mastered price action trading on the daily charts are very likely to over-trade if they focus on the lower time frames instead. This is because lower time frames tend to be riddled with lower-probability trade setups that often tempt traders to take positions that they would not have otherwise taken had they been focused on the daily charts.
Another example; do you enter into additional trades just because your current trade is in profit and you’ve moved to breakeven? Was the additional trade setup REALLY valid or did you jump the gun because you were feeling excited about your first profitable position?
There are many other situations in addition to the two discussed above that constitute over-trading. The main problem is that many traders are simply unaware that they are over-trading when they are in the moment. It is very easy to become fixated on a less-than-perfect trade setup and forget about your trading plan and not be consciously aware of whether or not you are over-trading.
Due to the fact that the emotion-inducing situations that occur in the market can sometimes be hard to detect and sometimes even over-whelming, we have to combat this enemy by planning out our trading plan and trading strategies while we are away from the market and not in any trades…
– The best way to stop over-trading is before you start…
As we just discussed above; because it can be difficult to realize you are over-trading when you are “in the moment” of trading, it is best to simply go on the offensive against over-trading by planning your trading strategy and trading plan in advance.
We can think of trading as a sort of war. The war basically boils down to your logical or objective brain mechanisms vs. your “fight or flight” or emotional brain mechanisms. It is extremely difficult to over-ride thousands of years of human-brain evolution…especially “in the moment”. The best way to win this war is to make a comprehensive forex trading plan, and stick to it…passionately.
I would bet money on the fact that if you are reading this right now, and you do not have a tangible and practical Forex trading plan, you are probably over-trading. It is absolutely essential to create a Forex trading plan and follow it if you want to get on and stay on the right trading path. All traders must do this in the beginning to develop the proper trading habits of logical and objective trading rather than emotional trading.