9 Reasons Why You Trade Too Much

9 Reasons Why You Trade Too Much

Hello, fellows Forex traders!

Excessive trading is the most common problem, especially for traders who trade on shorter timeframes. It may occur for a number of reasons, so if you don’t know what the purpose of your trade is – i.e., what instruments you trade, how you trade, what your trading strategy, your motives, personal styles and your trading and personal story are – I’ll give several explanations why traders fall into dependence on trading and give some possible solutions to this problem, hoping that you will find your own solution among them.

One of the main aspects that you should understand is to distinguish between when you are trading excessively and when you are not. It is unlikely you will be dependent from trading permanently, therefore it would be useful to determine the time when you don’t trade excessively, and to see hints of what happens in these situations and whether you can act like this more period of time. Identifying those moments when you trade efficiently, and increasingly trying to act the way you act in such situations, you can also reduce the number of cases of your excessive activity.

To determine when you become too active, you need to have some basic criteria from which you could start and, thus, determine your deviation from this value, for example, it may be the number of completed deals or your trading volume. Of course, there may be situations when high frequency  of trading is allowed, e.g., when the markets are volatile and there are much more trading opportunities than usual there.

Below I will give some reasons why traders, and possibly you can trade too much, and some possible solutions to this problem.

Passion and emotions

Passion and emotions

This occurs when a trader trades in Forex, overfilled with feelings of excitement and pleasure, but not for profit. Just like the majority of people playing in the casino. If your goal is just to have fun and be excited emotionally, you also have to realize that in the long term you will most likely develop a dependence on trading, and you will unlikely make a profit. If you want to  make profit from your trading then you need to change your motives and objectives, to forget  joy and excitement by going to more professional and structured approach with the desired result in the form of a productive trading, expressed in monetary or percentage terms.

Lack of a clear trading strategy

forex Lack of a clear trading strategy

When a trader has not a certain a strategy and, therefore, any parameters to determine when to trade and when not, any price movement in the market tempts him. In this situation, traders are very prone to chasing trends and often find they buy when the trend is moving down and sell when the trend is  moving up. They have the impression  like they are doing everything for nothing, as if the market is watching their actions.

Are you familiar with this situation? Most important course on which you can focus is to develop your trading strategy, which clearly defines the presence of a particular trading opportunity, fundamental data, technical analysis, or combinations of both. This will help you to become more selective in your trading.

Boredom

Boredom

In conditions of a steady market, when a trader spends a lot of his time in front of a computer screen, there periodically will be times when there will be weak trading opportunities in the market or there will be none at all – in these moments the traders can have the feeling of boredom.

These periods in trading are natural. For some traders it can cause big problems – especially for beginners, whose trading activity is based on emotional excitement, who work on enthusiasm or who are in desperate need of money. Below I have provided more detailed information about them. The most important question you should ask yourself is the following: “Do I trade to get rid of boredom or to make money?”

You need money

You need money

This is one of the worst situations in trading. This is a strong and powerful situation, but it will not contribute to a good trading in general, if the outcome of your decisions will focus exclusively on making money and not on your trading strategy.

Assessment of your financial needs and effectiveness of your trading is very important. And you shouldn’t adjust the search of entry signals for that you are missing out on beer.

Any action you can take to alleviate your urgent need for money will be a big step forward for you.

Enthusiasm

enthusiasm

The novice traders are full of enthusiasm. Traders that open new markets and use new trading methodology, are also prone to greater enthusiasm and passion. Although this enthusiasm is a positive quality, it also has a dark side, which is an excessive enthusiasm and search for any possibility to open a trading position.

Keep your enthusiasm, but direct it to the development of your trading strategy and discipline. If you have specific trading ideas, develop them on the demo account where the cost is obviously much lower. Also it is recommended to use your enthusiasm to create any report or technical developments that might be required, or for any other specific trade tasks.

Lack of patience

Lack of patience

Traders who suffer from lack of patience, become dependent on trading, because they will use opportunities that are not part of their trading strategy, and thus, they naturally will make more trades than it is necessary.

Cultivate patience, look for opportunities to analyze the markets, take the time to just look at them and not to act. May be you should try to practice self-awareness, to help identify and work with overcoming the desire to facilitate a sense of impatience.

Training of patience is a great skill, it promotes you as a trader therefore do not read into the times when you did not make trading operations, as wasted time, but take it as good  time, spent on developing your patience.

Trading in retaliation

Trading in retaliation

This is when the traders lost money in loss positions, after mistakes or accidental opening positions, etc. and are usually eager “to work off their money”. Despite the fact that the purpose of such behavior/thoughts is positive, the resulting behavior usually is not. Simply say, this is banal desire to “win”.

Traders who pursue their losses will deviate from their trading strategy, opening positions that are profitable, regardless of whether they are consistent with their trading strategy or not, because, according to their mental attitude, their goal now will be to make money, not to comply with their trading strategy. If you suffered large losses  or lost a large amount of money in the number of trading operations, as a rule, you should take a timeout. This timeout will allow you to get the time to divert your trade status and reorientation, and, most importantly, it will break behavioral model “loss of money → feeling of anger → desire to get your money back.” The timeout breaks this model of behavior and allows you to redirect yourself – use the techniques of breathing and relaxation or take a slow walk that will help you to dilute your emotions and reduce the desire of taking revenge in trading.

Fatigue

fatigue

When you are tired, physically or mentally, your brain does not have enough energy to function in full, and a low “fuel” level will reduce your level of self-control.

It is self-control, not a trading strategy, that is necessary to trigger the brakes in your brain to stop your trading, and this requires a source of energy. When you are tired and the fuel level is low, your self-control will also be low; there will be more chances for unwanted and unnecessary trading. Rest and glucose (derived from food and sweets) are the two main factors enhancing the functioning of the brain on the energy level. When you trade, you should be firmly confident that you are cheerful and full of energy.

Focus on not to trade too much

Focus on not to trade too much

You should not focus on the periods when you do not show hyperactivity, because it can be inefficient: as it turned out, if you constantly think about the times when you do not show hyperactivity, then you naturally begin to think about those times when you are overactive also, and your brain also develops internal resistance – “try not to think about a white bear.”

Focus on the calmness. Remember the times when you got everything, and remember your trading on demo. Remember the times when you were calm and confident.

Better less but better

Better less but better

Thus, there are several reasons why traders trade too much, and I gave you some possible solutions to help you overcome them. Analyze which of them may be the most appropriate in your situation, test them and write about it in the comments.

Take care,

Michael

  • Валерий

    Hello Michael ! As I am a new follower of your blog, firstly, I wanna thank you for your useful posts – a lot of helpful information for me as for the new forex trader!!