What is the difference between "practice" and "over-trading"?

I have been demo-trading for 5 months now and gone through what seems to be the typical “newbie” learning curve of over-leveraging, over-trading, winning some and losing more. I am at the point where I can break even and striving to get to the make money point.

Everyone talks about having a plan, using a trading journal, discipline, patience and so on. I get that part.

Then they speak of over-trading as being one of the biggest downfalls to new traders. YET, they also say that trading is a skill that is developed over time and through practice. Being an athlete, I relate this to free-throws or balls hit on a driving range. The more you do, the better you get (usually).

Hence my current confusion… What is the difference between practice and over-trading? Is it simply the mindset and intention behind the trades (as in greed and trying to maximize ROI) or is there something more?

I could be wrong, but I think as long as you are sticking to the plan (and not “well it’s close to my plan”) then you aren’t over trading. It’s fine to trade a lot as long as you can consistently make pips without violating risk management. Scalpers trade a ton but it’s ok because it’s there plan.

Trading slides into over trading when we abandon planning for chicago real estate listings movement,mistaking activity for purpose.Successful traders recognize this escape mechanism and put it in the background so it doesn’t distort their trading activities.Failure waits on every trade and there are factors other than the analysis of trade that have a significant impact on our trading success.Stop-Loss is good in theory but difficult in practice…!!

Over trading could mean a lot of things; your constantly trying to regain your previous loss by entering another trade and another and another and another and another, you constantly see setups however this is reliant on market conditions yes you can get good market conditions a lot of times that give you signals but once every 5 mins? Or More? Unless your in a string of profitability and consistency and speedy loss cuts its subjective to the individual.

If your practicing it could be different in the sense that you could have 20 trades a day, fine, over an array of pairs even better, you could be an intra-day trader so you take all the trades you can during a session. Between me and Jay, jay can take up to maybe 20 trades a single session then call it a day. For me since I am forced to intra-day with my firm, I usually have 30 stocks but I was recommended when NYSE gets back up to get 50 at the very least and once that happens I will also be intra-daying maybe I’ll probably get to 100 stocks if I do.

A guy at my firm analysis 300 stocks a day, he has maybe 5 that trigger right away, but take him out in the long run. Don’t get me wrong we have nearly the same approach just different methodologies. If he were to get through all the 300 he’d be rich however it can be a b1tch to maintain. I have a problem analysis 30 and later I do 50? I’m glad if I get atleast 2-3 order triggered a day and thats my day, sometimes its good sometimes I bust out, most ever triggered so far is atleast 5 in a day so that means I get about 25 trades a week. thats still 4-5x more the trading I do for my fx.

Do I consider it over trading?
No I am simply being an intra-day and a swing trader.

Trading is a form of professional gambling, so to be successful you can never gamble in the usual sense of the word, even though that seems to be human nature. There is a lot more to trading than psychology but practicing patience and trade selection and dealing with the emotions of fear and greed are a big part of the learning curve.

Ekk…did i just see the term ‘GAMBLING’…oh dear oh dear.

Trading is not a form of gambling, as gambling in its simplest form refers to an edge that cannot be outperformed by the house whom provides the services to the punter, or more commonly known as the ‘idiot’.

Trading, can outperform the odd’s, therefore it is speculation, not gambling.

You see, gambling is when the parameters are fixed and you can’t go beyond these as the house edge stops you. Speculation, on the other hand, has no parameters and it is down to one’s knowledge to seek these parameters and find an edge that works for them, the trader.

  • Take any casino game, the parameters are visibly fixed, and also statistically.

  • Take any trade, the parameters are not fixed, interpreting the data given to you correctly will enhance your probability of making the trade profitable.

And, yes, before you catch me out, the term ‘probability’ can be used as a common phrase in both gambling and speculating.

I hope that clears this up

Gambling is wagering on random events. Professional gambling is gambling with an edge, like card counting, being a good poker player, running an insurance company or successful trading.

Gambling with an edge is not gambling, its speculating. There is a difference between gambling and speculating, however grey the area is.

There really is no difference between gambling and professional gambling, what’s the difference? Is it that the mug who quit there day job to gamble is now a professional gambler?

Card counting is speculating, as there is an edge, playing poker is speculating, as there is an edge (providing you are playing against players and not the house, i.e. 3 card poker…) and running an insurance is also speculating as there is the knowledge of past claims etc.

I’m just trying to separate out the term gambling from speculating. It’s all about the possibility of gaining a true statistical edge, (not an edge that you think you have in your head).

In black and white

Gambling = NO EDGE due to statistical barriers
Speculating = EDGE due to no statistical barriers

By the way, I’m not trying to argue or come across as an arrogant idiot, just trying to get a common misconception of facts :slight_smile:

What you’re calling speculating is what I’m calling professional gambling. You’re right that having an edge is not something a person can just think they have. Possessing an edge means having a strategy that has positive expectation. Our differences are really semantic and I think ultimately we’re on the same page.

I guess it’s different in the UK but in the US professional gambling means what you’re calling speculation.

There’s a fine line between gambling and risk.

As a trader or trading you can have the option to take risk off the table completely, either from a trailing stop or what not, you can scale out therefore you have structured yourself to win no matter what.

Where as gambling you have no control of the outcome and last I checked you can’t take money off the roulette table, poker table, whatever table suits your “everything I drop money on to make money is gambling” ideal. I have dealt with many of your kind and I’m kind of tired of explaining this.

Hell you might as well call investing gambling, your putting money based on the odds that this new business with the model of selling computers to regular consumers rather than corporate targets. You can mitigate risk by giving them a little for some progress like your raising your bid and the rules like im gambling your not able to while the game is in play take your money off the table before the final card comes up on the river and your boned. The company was a shill your money’s gone.

Its like most of you people are afraid that there’s some evil casino boogeyman card shark waiting to take your money and then its time to ask why are you even here asking traders or trying to justify your right for calling it gambling. If your point is valid, great, we don’t care, you’ve accepted its gambling we’ve accepted it as trading and if you insist on telling everyone its gambling don’t do it, sorry this ain’t the corner you belong in.

Also, you can analyze because we will all have losing trades on why they lost and try to downsize when you lose. In gambling you lose or skip so many hands how are you supposed to analyze? Don’t say counting cards or calculating the statistical odds because the casino WILL KICK YOU OUT IF YOU ARE COUNTING. E-poker can be programmed and fixed as well to make plays “interesting”. You can’t go back to table 36 on your 12th hand and say oh god damn if I had hit again I would of had more because the cowboy was ****ting his pants with a crap pair and the other chump who won was just bluffing all his way through.

U know sometimes don’t listen to people and experience everything yourself, this way you will truly learn bad and good. And trading is definitely not gambling, if you suck and u think its gambling its ur own mentality, show me Profesional roulette player(none), and show me professional trader(lots).

Well, I will eat my words. According to this economics book I’m reading, speculation is wagering on [B]pre-existing risk[/B] whereas gambling is wagering on [B]created risk[/B]. So in that sense running a casino would be gambling but running an insurance company or trading would be speculation. My apologies. :slight_smile:

And sorry for hijacking your thread, PrecisionFX. :frowning:

Im actually gonna quote that and what jezz said in the future now.

im with you Tansen

I think you’ll find that a “card counter” is not a professional gambler, he’s a cheat.

Interestingly the American courts have ruled that card counting is not cheating because you’re just using your mind and cheating would have to involve manipulation of the cards somehow. But card counters do use deceptive tactics to avoid detection which is hard because there are things a counter must do to be profitable, like changing bet sizes, especially at the end of a shoe.

I know the US courts have ruled that card counting is not cheating but now i’m not so sure about the reasoning because there are forms of cheating that don’t require manipulating the cards like having a partner try to peek at the dealer’s cards and signal you.

If its not cheating then why do they even need to avoid detection? Just go right up and announce you’re a card counter to the dealer before you begin.

For me, If we follow the trading plan consistently, that’s not overtrading…but when we trade based on our emotion that’s what I call overtrading…

According to me, [B]Practice[/B] is doing something in limit while [B]Over practice[/B] is forgetting any limit and being addicted to achieve more and more without thinking about good or wrong related with that.

This is absolutely right.