I wrote an article for the “Forex Project” blog which deals with over trading and offers some techniques I use to avoid unnecessary trades. If you would like to read it I invite you to click here or visit www.forexproject.com.
Along the topic of over trading Gary asked the following question in yesterday’s comments:
So how many trades have you made in August? I’ve made about 25 (I think I’m still over trading), somehow I think you’ve made significantly less. How many trades do you average each month? Just curious.
Thanks,
Gary
I made 8 trades this month, 7 winners, 1 looser and booked a total of 825.4 pips after all my lots had been squared. Six of the trades were blogged as they developed and judging from the emails I’ve received readers made money off those trades which is fantastic! I usually take 4 to 8 trades a month.
In my opinion over trading is a behavior trait rather than the number of trades you take. If you’re taking trades outside of your trading plan, after you have met monthly goals or because you are board you’re over trading is likely caused by a lack of discipline.
I usually only take one to three trades a week. I shoot for 50 to 100 pips a week and once I get that number, I am done for the week. One hundred pips a week may sound low to a trader grinding out 20 trades a day on a 5 minute chart but I don’t like to watch charts and low stress suits my lifestyle just fine.
I’d like to hear your thoughts on over trading. Is it a problem for you? What do you think it’s root cause is? Share your comments with us by clicking here.
I am really looking forward to the Labor Day holiday here in the U.S. and I hope you have a wonderful weekend in your corner of the world.
Ryan
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In response to over trading comment. I think the root of the problem is the time frame when you booked pips. Example, if you booked 100 pips at the beginning of the week and you have two more good potential trades that would give you est. 200 pips, you would take the 2 trades even though it is not part of your plan because it is the beginning of the week and you can increase the amount of pips you booked by the end of the week.
Ellis makes a good point, what do you do if you make a big trade on Monday and then see good trades later in the week?
If you make your goals on a Monday and trade again the problem remains a lack of discipline.
It can be difficult to ignore trades for the rest of the week but your after smooth and steady gains which you shouldn’t place at risk once you have them. If you have a propensity to over trade walking away is so important.
I have a friend who simply refuses to open his trading platform as soon as he makes his goals figuring if he doesn’t even look at the market, the temptation to trade is eliminated.
I guess if you make a big trade on Monday it is time to go play some golf.
Ryan
Hi Ryan,
I think people over trade (or at least I do) because of lack of dicipline. This lack of dicipline manifests itself in two ways:
1.) the temptation to make more money if you are already profitable,
2.) the need to make money if you are not profitable.
As humans we hate being wrong, despise losing and love winning. I guess that’s greed and fear for ya.
Bill
I have seen some records from automated trading system with EA and they have more than few hundreds trade in a month….
Anyhow, we’re human… we’re just too emotional, fighting in between fear and greed.
Hi Mr.Ryan
I think its depend on individual to allocate how much he/she trade per day or month. For me its ok to overtrade as long as he/she don’t get a margin call. Like me, I like to watch the 5, 15, 30 minutes charts and made a lot of trade everyday. As ussual some profit and some losses. zaidon
Hi Kevin,
Yeah I’ve seen automated trading records also and for a few years now I’ve tried my hand at programming some expert advisors in Meta Trader but I haven’t seen much success. I don’t know how they do it, would love to know though!
I stick to discretionary trading which I would wager is where most retail traders hang out.
Appreciate the comments!
Ryan
Hi Ryan,
No problem at all, I’m a newbie and wanted to learn more about this trading as it’s getting hotter and hotter these days in my country.
I’m also very interested in the EA programming and looking forward to participate in the championship next year.
Thanks to you too for your reply.
Kevin