Overtrading?

Beginner Questions
6

Ok - sorry: I may slightly have misunderstood your original question (“overtrading” usually means “entering trades too often”, but I see now that you’re referring to total simultaneous risk-exposure!) :8:

I see your point: it’s easy to do this inadvertently, with forex, since currency-pairs tend all to be to some extent correlated (either directly or inversely, so it matters which?). That mostly depends on your position-sizing, i.e. risk of loss in proportion to your total account-size.

For myself, I never have more than a total of 1% of my account at risk at any one time. So if I’ve added another 1% to a winning position (which I sometimes do) it’s only after moving the stop-loss enough for only that most recently added 1% to be at risk.

I’m not saying that the “1%” is an immutable figure that should apply to everyone else too, of course (that will depend on the size of their “edge”), but I think the principle’s valid, in that you shouldn’t expose to risk at the same time more than whatever proportion of your account meets your own risk-management parameters, degree of risk aversion, acceptable drawdown, and so on. (For myself, my blood would freeze and I might collapse, if I ever had a drawdown bigger than 5% of my total account, and even that would be very hair-raising and unpleasant indeed.)

Depending on your trading style, of course, it may be possible to mitigate the risk. For example, if you’re trading GBP/USD and USD/CHF at the same time, either both long or both short, that [B]reduces[/B] risk because the two pairs are inversely correlated (i.e. you’re effectively long on the USD in one trade and short on it in the other), whereas if you’re trading USD/CHF and USD/JPY, both long or both short, at the same time you’re [B]increasing[/B] your risk, because changes in the value of the USD will have more or less a double effect on your situation. In short, it’s all a little bit more complicated than it looks.

In short - there’s nothing wrong [B]in itself[/B] with having 9 trades open, but if you’re actually risking, say, 9% of your account at a time, that may be [U]terribly[/U] dangerous.

Sorry if I haven’t answered your question very helpfully, here! :8:

7

Over trading might if still newbie will making confused how to manage all order that opened, will better for learning purposes as newbie they learn plan simple with use risk reward ratio like as using 1:1 which if stop loss use 20 pips hence target also 20 pips too

8

Heaven forbid that you should ever actually [B][U]read[/U][/B] a thread, before replying to it, Bearish. As is so often the case, your comment has [I]absolutely nothing[/I] to do with the OP’s question at all (not that my own first attempt exactly hit the bulls-eye, on this occasion, admittedly) …

9

Thanks for the reply. I came hear to learn. I had to ask the question as I became a bit better with keeping a poker face, but I find that my heart starts racing slightly when there are many trades that I have to manage at the same time.

Sometimes I want the market to take out my trade if it is not really moving. Like earlier I were long in EURCAD which were not really moving and then that news spike took me out. My plan was to break even on the trade, but lost about 15pips which was ok.

The reason I take trades as they come along, is because I planned the entry hours and sometimes days before the move that I anticipated comes around. When it comes, I take it else I miss the train and might have to battle with myself wanting to take revenge.

10

Ooh, well - to answer your question, this can be [I]very[/I] high risk, and [B]is[/B] really a kind of overtrading, because sometimes those are going to be a lot more than 15 pips.

The particular risks of major news announcements (and perhaps especially US ones) are that they’re exactly the times your broker may not be able to honour your stop-loss (because of fast-moving markets), and that they can affect several pairs at exactly the same time, so if you have multiple positions open simultaneously, you can very occasionally face a huge loss without being able to control it. :eek:

People vary a lot, regarding the extent to which “fear of missing the train” affects their trading. The reality is that there will always be other opportunities.

Over-exposure to risk is in fact a much more realistic thing to fear, because actual losses are worse in their effect than missed opportunities.

I have no real “psychological insight” into others at all, but I strongly suspect that “fear of missing out” is (at least to some extent) an indication that aspiring traders are [B][U]not[/U][/B] instinctively looking at their trading as an exercise in [I]risk management[/I], but are more concerned with maximising profit … and that’s something they should try to change, because in the long run it’s not going to do them any favours. :33:

11

Thanks for the good tips.

12

Trading too much under the influence of emotions is considered as over trading…

13

If you are trading according to your trading plan, then you are not over trading. Its only when you trade just to remain in a position, you are over trading.

14

Over trading in Forex is not good as it affects the growth easily. You have to trade slowly in order to get good result. Forex market is not running anywhere. Many people think that it is good, but indeed it is a bad thing.

15

My own understanding of overtrading is that occurs when a trader takes on too many trades without being able to handle it, neither in terms of risk management, nor from a purely psychological standpoint. In other words, when they bite more than they can chew.

16

Over trading occured might because any trader only tempted by price movement, and as trader have no plan in their trading and usually over trading occured because they want to making profit with take all opportunity but as trader less consider with risk management and only causing confused if we over trading

17

Thanks for the good tips.

18

As easy as that.

Summed up in 2 sentences.

19

Most of the traders are greedy when they are getting profit . They want to get more and more at the same day . This thing is over trading when they do trading after getting their target or do not act upon their plan . I do not like over trading want to do that much in which I do not feel bore with trading.

20

When you are not comfortable with multiple trading pairs, then it would be effective for you to add new trading charts gradually! Even, one single trade position can be dangerous for your capital if you use aggressive trading lot size! But, trade with multiple trading pairs if not bad actually if you have good trading strategy or proper knowledge on Forex market!

21

It is obvious that you will over trade when you start your live trading in forex market. Its such an addiction that you can’t help yourself doing that. Slowly when you understand the true risk involved in the market you start controlling your trades.

22

I like to diversify risk by trading multiple pairs. Of course, I’ll reduce trade size to stay within my money management rules. Reducing trade size is the best thing one can do to reduce risk. Your money management rules should prevent you from overtrading. If you aren’t comfortable that they will do so, you should spend more time on perfecting them. Best success. -G

23

As we can possible avoid over trading because will often causing failure in trading, we as trader need always keep discipline with risk management also money management in trading which not always as trader will able analyze the market properly

24

You should not get nervous as you are performing quite decent and you should carry on such kind of work, you did not overtrade, so you should continue this practice in the real trading in order to get the fruitful result from this business.

25

I honestly want to know can there really be over trading? At what point would you say one has done so?