Everyone works hard to become a professional trader. Very few people manage to make it to the end since they don’t follow the basic protocols of trading. For instance, overtrading is one of the main reasons people lose money. The rookies don’t have any idea what overtrading is! If you ask them, they will just say not placing too many trades is overtrading. But in reality, the problem of overtrading is beyond this simple definition. After reading this article you will know whether you are overtrading the market or making some big mistakes. Before you complete reading this article, make sure you will follow the tips mentioned, or else it will be a waste of time and you will never become a successful trader.
Frequency of trade execution
Anyone executing more than 3 trades in a day is overtrading the market. This is the simplest concept of overtrading. Finding 3 trades even as a scalper is a very challenging task. If you think you can find more than 3 trades you overtrading the market. You might say, you are analyzing multiple assets throughout the day. Though it can help you find more than 3 trades, you need to pick the best 3. Considering the risk in each trade is 1%, taking 3 trades per day is more like risking 3% of your account balance. If you intend to take more than 3 trades due to the use of multiple instruments, you must make sure the overall risk exposure does not exceed 3 % of the account balance for that day.
Trading the 1-minute chart
If you are trading the 1-minute chart, you’re probably are overtrading. Though some of the scalpers use the 1-minute chart and find some really good trades by using a professional platform they never take more than 3 trades in a day. Check out the professional trading platform offered by Saxo and you will be able to learn lots of new things about this market. Once you become good at analyzing the market dynamics, you can trade a 1-minute chart with a high level of precision. But still, the rookies should not use such a lower time frame as it will result in overtrading.
Taking more than 3 % risk
If you are risking more than 3% of the account, you are overtrading the market. There is no reason to risk more than 3% of the account balance to earn your living. By taking one percent risk and increasing the risk to reward ratio in each trade, you can expect to make some serious profit from this market. It will lower the risk exposure and allow you to execute high-quality trades in the market. Things might be hard at the initial stage but once you learn to take the trades with managed risk, you can focus on quality trade execution.
Not following the trend
Those who don’t follow the trend are always overtrading. You might think they are not overtrading since retracement is nominal in the trending market. But in reality, they are taking trades in the slightest corrective movement. It also increases the risk to a great extent. To boost the profit factors in trading, you must learn to take the trades with low risk. This should be done by following a trend trading method. If you ever try to learn to trade the reversal, you must have strong skills in analyzing the major chart pattern.
The elite traders in the Forex market always follow the tips mentioned in this article. If you want to solve the problem of overtrading, make sure you are never breaking the rules. Be a confident trader and don’t aim for unrealistic profit. Keep things simple and you will become successful.