What is Overtrading & What Causes It?

[TheDawn]

What is Overtrading & What Causes It?

-From how I understand it, overtrading is when the potential loss of our trade(s) would be larger than a prudent loss % of the trading capital

-What causes overtrading: greed and lack of a proven successful trading plan

 

[legionx]

Overtrading:

Trading with scared money

Trading in the market condition you are not comfortable with

Trading in excess of your daily stop loss

Not waiting for your setup


Causes of Overtrading:

Lack of Compartmentalization

Ego

Lack of humility

A string of losses (can lead to lack of confident in setup)

A string of winners (can lead to overconfident in setup)

Outside events like bills and to please family and or friends

Greed

Fear

 

[SimpleMeLike]

To make money in the markets, I must enter trades. If I don’t trade, I make zero dollars. So, I need a critical mass or a minimum number of trades to profit enough for my efforts to be worthwhile.

Let’s use food as an analogy: I need food to stay alive. However, if I overeat or eat the wrong types of food, I will degrade my health and even shorten my lifespan. Yet I can’t cut out food altogether because I need it to function.

Overtrading is similar. I must trade to make money in the markets, but I can reach a level where the behavior becomes unhealthy.

Ultimately, overtrading is caused by not having the discipline to follow a successful trading plan. There are several triggers, and while this is not an exhaustive list, here are some leading causes of overtrading I’ve observed:

1. Assuming money should always be in the market. There will be quiet periods when a strategy does not produce any trades. It’s easy to feel that this is automatically bad because not being in the market means not making money. However, a critical part of trading is knowing when the conditions aren’t right and that it’s more profitable to stay on the sidelines in cash.
Ultimately, overtrading is caused by not having the discipline to follow a successful trading plan. There are several triggers, and while this is not an exhaustive list, here are some leading causes of overtrading I’ve observed:
2. Fear of Missing Out (FOMO). FOMO is a classic psychological issue in all areas of life, and I’d be surprised if there’s a human being on this planet that’s never experienced FOMO. So, it’s not surprising that traders feel FOMO in the markets. When the markets move, it’s tempting to want to be a part of the move, even if it means jumping impulsively in a way that does not fit the trading plan.
3. Boredom. Sometimes, people just crave action. The boredom of waiting for a trade to line up is a real trigger to enter trades without the right conditions and eventually overtrading.

Good Morning nikokalo75,

There is no such thing as OverTrading.

Overtading is trading industry marketing term developed by the Trading Businessman who sell trading products to wanna-be traders who have low education on trading who trying to make $1 million in a year to retire from work or make losses of years of losing money.

Overtrading is an excuse word for not making money trading. It used by trading sellers to give the trader that invested in their book or trading education as an excuse when you tell them you are losing money.

We are all adults, the market is open 23 hours a day, trade as much as you want to , however you want to.

Also, overtrading is a GOOD thing, because the more you think you can make money on a trade and take the trade, the more fast money you make and quicker you reach million dollars or whatever your money goals is from trading.

There is only one word we to know in trading, and that word is Win.

It's all best guess anyway when discretionary/guessing manually trading.

 

[murray t turtle]

I watched and watched the market the whole day and then finally got a signal. Got in and got screwed $300 in 5 minutes. Care to explain that?

%%
WELL JS may have used 5 to profit;
but wonder why one of Chicago exchange managers said ''innovation deserves more than 15 minutes of fame??''
He-exchange would make much more in comissions\bid ask if all used 5 minutes.
But since you noted ''a whole day''
Don Bright Daytrading Co did not like 5 minutes = too long/ which i thought was funny

 

[Gambitman]

For a day trader I would say over trading is often linked to time of day. First and last 1.5 hrs of the session generally have the most movement and should be the best time to day trade. But people are often hesitant the first 1.5 hours and intimidated by the movement at this time. When things have slowed their confidence returns and they place a trade generally copying something they have seen from the first 1.5 hrs. In this instance 3 trades in the first hour may be perfectly fine, but the single trade taken in a range bound market during the middle of lunch is an example of overtrading. Figure out when your system/style is most compatible with the market range and trade then. Not when you feel comfortable.

 

[spudpei]

Over trading happens when you are predicting the market. You slip into the delusion of predicting the next trade should be put on*. You can make a Sh!t ton of predictions in a day.

A plan will have the exact right amount, by definition. React to the plan signals and put on a trade. Don't predict the signals! Otherwise, you will have trades outside the plan, and possibly many more than the plan.

How would you trade with predicting, if I may ask?