How Can a Trader Stop Overtrading in Forex?

Nov 13, 2020 1:38 PM ET

iCrowdNewswire   Nov 13, 2020  8:38 AM ET

Overtrading is simply the act of entering into the trades too often. This kind of activity is very common among the newbies and intermediate traders. But professionals and successful ones are very aware of the consequences of frequent trades. Beginners prefer to trade too often because they think that they can easily make profits from it. Overtrading can be caused by three issues –

  • Make up the loss: This is called a revenge-minded attitude. When beginners lose too much money in their trades, they want to recover that money. This kind of thought drives them to enter into the trades frequently.
  • Being excited: Sometimes, investors become too excited to enter the market to make more money. These people jump into the Forex and enter into the business without conducting any prior analysis. Even they don’t care about the chart patterns.
  • Being greedy: Greed plays the most crucial role in ruining the career in this CFD industry. Many people jump in this market only to make money, and they believe that entering trades frequently can bring more money. But a single crash can destroy all their capital.

How can you realize that you are overtrading?

To realize this, you have to observe the frequency of entering the industry. This is common among the day traders in Singapore because they choose a shorter timeframe. Newbies choose a shorter timeframe but trade too frequently to earn money quickly like the professional day traders. Remember, futures trading is not an easy task. You must trade the high quality trade setup or else it will be a tough task to manage the risk profile at trading.

How can you avoid overtrading?

To avoid this activity, experts suggest maintaining and following a strict trading plan to include risk or money management techniques. Let’s have a look at the techniques to avoid this problem –

1. Plan the week prior to

This is an effective way to decrease the frequency of entering the market. An investor can plan everything in advance. He can set up the timetable – when to analyze the chart, when to study more, when to practice with a demo account, etc. Planning will help you to avoid entering the market too often.

2. Trade only from the chosen timeframe

Many people enter the FX industry now and then and spend their valuable time looking at the chart. Thus, they think that the graph is revealing a potential entry point. As a result, they jump into the platform and start taking risks.

Professionals always recommend that the newbies should focus on learning about the trading industry instead of entering into the deal. They should spend their time practicing with the indicators, technical and fundamental analysis, movement of the chart, and so on.

3. Set up your goals

Every beginner should establish a concrete goal once they enter the market. They should not only set up the plans, but also they should focus on it. An investor can write down his dreams and the goals that he wants to attain. It will help him to stay away from the platform.

4. Include the risk management techniques in the strategy

Many rookies don’t realize the necessity of establishing risk management techniques in their strategy. They include few assuming that those techniques are the barriers to making money from the Forex industry. However, they should remember that money management can reduce profits, but it reduces risks as well. Therefore, one can ensure that he doesn’t have to face a massive loss during a crash. The management restricts a trader from entering the trades by setting up a few rules.

This currency exchange market is highly volatile, which is the reason for facing a significant loss in the market. Nobody can predict the upcoming movement of the price. This is why professionals always recommend the rookies avoid overtrading and stick to the strategy and adopt the risk management techniques.