What Are The Problems Of ''Over Trading?''

Hello all,

Most of the traders couldnt handle their emotions. So they are going to martingale or taking too much trades till it goes in the righy way also called as ‘‘over trading’’.

Why are people attracted to this?

The answer is simple, it is in our mind and brains.

  • Winning trades releases Adrenaline and Dopamine… This gives you extra confidence. This is a feeling you like and your body gets addicted to so you fight next time to win again and again. But the market will defeat you sometimes and this is where it gets dangerous. So be aware of that please.

  • Losing trades releases Cortisol. Especially in situations with high stress. Executive functions that help you with advanced thought processes like strategies, shut down. And the Amygdala, our instinctive brain, takes over. This is known as a ‘’Amygdala Hijack’’ The body makes a chemical choice about how best to protect itself. In this case from the shame and loss of power associated with being wrong and as a result is unable to regulate its emotions or handle the gaps between expectations and reality. This makes you over trade or martingale and destroy your account. So you have to stop yourself from an ‘’Amygdala Hijack’’.

Mine advise would be: Set your manual stoploss at around 2 per day or session. Understand that if you hit your stoploss early, the market are not conducive to your strategy and you will lose more if you continue. Your emotions paralyze you and your biggest enemy. The goal is to slowly desensitize yourself to wins and losses.

For example: 1 win per day is 22 wins per month. So focus at first on 1-2 trades per day and by end of month its many wins. Low volume, high itm trading.

Hopefully this will helps you more with trading.

Greetings,

BSB Zen.

3 Likes

I don’t agree, though I agree that over-trading is dangerous and I think your motives are good.

Over-trading is very dangerous if you have a weak strategy. It leads to more frequent losses, leading potentially to revenge trading and over-leveraging to regain losses asap. Obviously, this is emphasised for day-traders, who are driven to seek every daily result in the black. But a weak strategy will empty the account whether you over-trade or not, so slowing down the leakage is not the answer.

If a trader has a strategy that the market is not today or this week conducive to giving winners, the problem is the strategy, not how often its used. e.g. if you have a car with faulty brakes, driving it less won’t help, you will still crash.

Over-trading with a winning strategy is not so bad of course because the bottom line is always improving, though it can lead to over-leveraging through over-confidence.

But even a winning strategy always generates some losers. Let’s say 3 losers in every 10 trades. The best way to keep that ratio at 30% is to trade more, not less: a smaller and smaller sample is more likely to lead to ratios away from the mean, like 40% or 50% or 60%, which could spell disaster. So 10 trades could easily include 6 losers: but 100 trades with a winning strategy should never include 60.

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We all dead in the long run. With number of trades tending to infinity your survival rate converges to zero. So basically if you have no non-market edge (like speed advantage or insider info), it’d be reasonable to reduce number of trades as much as possible by adjusting R/R and lot size.

Sounds like a resignation letter???

Overtrading is a common problem. Over trading is a common trap that many traders fall into. Knowing when to stay out of the market, and when to take risk “off the table” is a key skill that needs to be learned.

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Great article, very well said :slight_smile: Over trading will just blow your account. It is very risky and it directly comes from emotional trading, greed and excitement to make more money. Looking forward to read more from you.

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Overtrading happens when we try to recover losses too quickly so, we trade more and more and ultimately lose. That is why it is critical to have a written plan; understanding how your strategy performs will allow you to wait out the losses without panicking.

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I would receommend anyone struggling with this to read The Chimp Paradox by Steve Peters. He splits human personality into three components with the Chimp being the volatile, emotional component. The book explains how it works, what triggers it and some methods to contain your Chimp in stressful situations where you might be prone to making irrational decisions like taking “just one more trade”.

Yeah, if you are suffering from anxiety problems while trading, it will help you out quite. You must read it if you feel like losing control.

This business is simple u need to know what are u doing but if not u need to have iron risk management

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