Thursday, June 16, 2011

How Much Trading is over Trading?

I hear people talk about over-trading and I never really know what they mean.

How much trading is overtrading and how do you know when you are trading too much? When you first start trading it is quite addictive and you want to trade every spare minute you have but then in the early days surely its good to trade as often as you can as you have so much to learn?

Well I suppose the definition of over-trading really is when you trade more than you had planned to. We have all been in the situation where we say we'll trade for a couple of hours but end up still trading 6 hours later. This normally happens because of 1 of 2 reasons:
  • we are having a really good trading session and get the feeling of invincibility that this brings so we assume that the more we trade, the more money we will make 
  • at the end of the 2 hours we had planned to trade, we are down and we feel the need to continue to trade to make back these losses
Now what normally happens in either of the scenarios above is that we start to trade in a different way to what we would normally trade, we start taking trades that are riskier than normal and we may well start using larger stakes. In short, we lose our discipline and the strategy that we had planned at the start of the session goes out of the window.

More often than not, overtrading leaves us with bigger losses or losing the gains we had made earlier in the day.

So how do we know we are over-trading and how do we stop it? Well that's the million dollar question and not an easy one to answer but here's my thoughts for what they are worth.

1. Have a strategy at the start of each trading session
2. Have a defined amount of time, or races, or matches that you are going to trade

If you then start trading for longer or in different markets you are over-trading because you hadn't planned to trade these markets. So what should you do if this starts happening?

Well, personally I take the dog for a walk or go for a run (if I'm particularly wound up) but do whatever you want but ensure you get away from your PC and do something to take your mind off trading. This will help you put everything in perspective again and make you realise that the next race isn't that important.

Also, another way to look at you trading is to think of it as a marathon not a daily sprint, it doesn't really matter how you do each individual day as long as you are making profits over the month or the year.

For more information on Sports Trading visit

No comments:

Post a Comment