How to avoid Overtrade

Overtrading refers to excessive buying and selling of stocks by Traders with Hope of making more money. Interestingly lot of traders themselves do not know whether they are overtrading or not, sometimes when they win they tend to over trade because they feel It Their “LUCKY DAY”. Other times they overtrade because they have string of losses and they want to overcome the same. Some other times they get bored because of lack of trades and they overtrade. Interestingly lot of traders themselves whom I have interacted as part of my Trading Courses  do not know whether they are over trading or not “Overtrading” is every time you take a trade that is not according to your plan.

Why does Traders Do over trading ?

Boredom could be a leading factor in a lot of traders’ daily lifestyle. As a professional trader, you should not let this feeling (state of being) take over your mentality. Every minute of bad discipline could lead to months of trading losses recoveries. Below are Few reason

  1. The belief that more you trade the more chances of you making money.
  2. Not Having a Trading Plan or Strategy  Which means that you don’t have a strategy or set up by which you can trade.
  3. Addiction to trading. Traders inevitably feel lost without a position on market and without a trade. Overtrading sometimes is due to inherent need to trade
  4. Leverage, Just because you can get leverage doesn’t mean you should trade excess. At the end of the day, leveraging also means faster way to lose money.
  5. Lack of discipline and work ethic.Lack of these qualities lead to boredom and boredom makes more traders eager to get into trade.

How to avoid  Overtrade

1. Know how much to trade –Maintain a Trading Journal which has your Trading Goal Trading Plan It’s usually great to include exact figures like how much you want to make this day and how much you are willing to risk if things go wrong. It is important that you are as realistic as possible. Give yourself targets for the day and do not change them no matter what.

2. Do a Physical Exercise — Short rounds of aerobics, strength exercises and stretching, when you have time during work hours, can help improve fitness levels and heart health. Due to the nature of the work, traders are exposed to high levels of stress exercise , keeps you mentally and physically alert. I Firmly belive Traders should play any Sport of these choice to feel more healthy and energetic.  A healthy lifestyle that includes physical exercise gives you more stamina, strengthens your immune system and typically gives you a better emotional balance.  As you probably well know, emotion is the trader’s worst enemy. Exercise can be even more effective than drug-store remedies for countering depression and anxiety.


3. Do not Trade All Day : Once in a while it is OK to stay on sidelines and sip a cup of Tea. Give your head a break!Make a diary of your trades and see what works for you. It is important to know how many trades you can manage profitably and stick to it. In trading one big loss can wipe away all your capital.


4. Use a Trading Plan :Every trader should have a trading plan. Entry and exit from stocks should not be random; there should be a reason behind each trade supported by the trading plan. Chances are, if a trader is overtrading or undertrading and a plan is in place, that plan needs tweaking. If traders are overtrading, they may need to make their entry and exit criteria more stringent or harder for the market to manufacture valid signals. When we add more criteria that need to be in place for a trade to happen, we will do fewer trades, but chances are that those trades will be more consistent and more profitable – although this is never a guarantee.


5. Only Trade a Set Number of Stocks per Day : Limit number of trades and stocks you want to play on daily basis or even positional basis. Stick to those rules.

6. Set Profit and Loss Limits for the Day: Once you hit your targets either on loss or profits. Take a break and call your day off. Do not sit back and try to trade your emotions and euphoria.

7. Limit the Number of Setups you Trade : limit your trading set ups and strategies. If you have many setups then you will find endless perceived opportunities to play. Few set ups means not necessarily fewer opportunities but more clarity and more high probability trades.




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