Trading anything from Forex to crypto and stocks has become very popular with people throughout the developed world. These markets are more accessible than ever to access and can represent a decent way of generating extra cash. As internet connectivity continues to expand globally and more people begin to find out about trading online, the number of people who get involved will increase.
If you plan to begin trading, it is vital to know what you are doing first. Carefully picking which broker to use, for example, is very important. A good tip here is to look over online reviews of brokers (like this Skilling trader review) from the AskTraders website. This site is a trustworthy source of broker reviews and brings together all you need to know in one handy to access place. You can also take in information on Bitcoin scams and other potential pitfalls around trading.
Another essential thing to consider when first dipping your toe into trading is knowing what to do, what not to do, and what the standard trading terms mean. Overtrading is certainly worth knowing about so you can avoid it – but what is it, and how can you give it a miss?
What is overtrading?
Overtrading is trading excessively and being too active in the market. It can manifest in several ways, but the most common is trading for extended periods without a break or feeling the need to be constantly active in the market. While it is important to place trades when the chance arises and close them when sensible, this does not mean you always need to be active as a trader.
Overtrading is disastrous because it usually leads to failure, taking on lots of trades that you should avoid, or closing trades you should leave alone. As a result, you find yourself making poor decisions that can come back to bite you – simply to get the buzz of being active as a trader.
But how can you avoid this trap?
Get your head right
Overtrading is a psychological problem to tackle. The root cause of the desire to be trading all the time is an emotional one. It all comes down to traders getting bored by not being active in the market and seeking an adrenaline rush by opening or closing trades. It will therefore help a lot if you can keep on top of your psychology as a trader.
Try to keep your emotions out of it and not give in to the urge to trade when you know it is not sensible. If you find yourself tempted to trade when you know you should not think about the hard-earned profits you will lose if it goes wrong or take time to recognize the feelings which lead to overtrading to stop them from influencing your decisions.
Stick to the plan
The importance of a good trading plan cannot be overstated! A trading plan is as it sounds – it is a pre-defined path that sets out how you will find opportunities and things like how much you will risk per trade, which markets you will look at, and more. These plans are an excellent way to avoid overtrading because they naturally limit the number of transactions that come up per day and make your trading more mindful and sensible.
Take a break when needed
The simple truth is that being sat at your desk for hours on end can lead to overtrading all too easily. It is just too tempting to keep checking the markets and convince yourself there is an opportunity that isn’t really there – just to bring more excitement to your day. Therefore, a good tip is to take a break after you have been trading for a while. Many successful traders will simply set a time limit for their session and quit until the next day after this has elapsed.
Don’t fall foul of overtrading
It is easy to see why overtrading is an issue for many traders. It would, after all, seem rational to believe that placing more trades or being more active as a trader will lead to more profits. That is not usually the result! It is the effectiveness of each transaction that is key. You may be less active as a trader than someone else – but if all their trades lose and most of yours win, you will make more money. Try to bear this in mind when trading and use the above tips to avoid overtrading.