All You Need to Avoid Overtrading in Forex

By | September 13, 2022

Forex Overtrade Challenge

Over-trading in Forex is one of the most difficult lessons for a trader to understand. If you tend to over-trade and continue to over-trade, you will lose a lot of money.

You expose your money to the market every time you enter, and the more you expose your money to the market, the more likely it is to part with you.

In this guide, we will reveal what is overtrading forex and how you can minimize overtrading.

What is forex overtrading?

Overtrading occurs when you trade too frequently, make excessively large trades, and take uncalculated risks.

There are no rules or legislation prohibiting individual traders from overtrading, but it can hurt your portfolio.

Traders often overtrade after suffering a large loss or a series of smaller losses over a usually long period. losing streak. To cover their losses or seek “revenge” in the market, they try harder to make a profit whenever they can, usually by increasing the size and volume of their trades.

Unfortunately, many times your trades end in additional losses and eventually ruin your account. This is one of the main reasons why 95% of forex traders fail.

What are the signs of overtrading?

When you get to know if you are over-trading, there are several indicators:

– If you close a trade at a loss and believe deep down that you should not have accepted the trade, you are guilty of overtrading.

For example, do you find yourself looking at lower time frames like the 5 minute chart and “discovering” better trades even though you are expected to trade from the normal chart?

– Spending too much time looking at forex charts leads to overtrading forex when you become vulnerable to seeing too much market activity.

Do you find yourself looking at charts for hours on end, trying to “nudge” the trade to get a “good enough” setup?

The biggest problem is that many traders clearly don’t know that they are overtrading right now. It really is possible to become obsessed with a less than ideal trading setup, lose track of your Commercial planand become misinformed about whether or not you are operating excessively.

Since emotionally triggering conditions in the market can be difficult to identify and even overwhelming at times, you need to fight this enemy by crafting your trading plan and trading strategy when you’re not in any trades.

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So how do you avoid currency overexchange?

To avoid over-trading, you need a recipe. No, I’m not talking about medical prescriptions, but about those that will save you from making impulsive or emotional trades.

Here is the list of things you need to do to avoid over-trading:

have a business plan

It is best to go on the offensive against over-trading by developing a trading strategy and trading schedule in advance.

You can think of trade as a kind of war. The battle is essentially between your rational or analytical brain mechanisms and your emotional brain mechanisms.

The only way to fight this battle is to devise and stick to a systematic forex trading strategy.

If you are reading this and do not have a concrete and realistic Forex trading plan, you are probably overtrading. If you want to get and stay on the right trading path, you need to build and commit to a Forex trading strategy.

This is something that all traders should do at the beginning to cultivate the correct trading patterns of rational and analytical trading rather than emotional trading.

Trading the markets generates emotions and emotional trading, but you will almost certainly over-trade if you do not intend to counter this fact.

Correct risk management

A Risk management You need a plan as part of your trading strategy. This includes the guidelines and procedures you establish to minimize the effect of failing.

You should use two realistic risk management approaches to ensure you don’t over-trade:

a. Calculate your risk per trade

It is up to a trader to decide how much money to lose per trade. It can range from 1% to 10% for traders who are willing to take a high level of risk.

However, if you bet as much as 10%, it can only take five trades to lose 50% of your trading capital, so it’s generally better to use a lower percentage.

You must make sure that the the risk percentage is manageable and that you can still achieve your business objectives for the level of risk you are taking.

b. Beware of the risk/reward ratio

To calculate the risk-reward ratio of a trade, you must match the amount of money at stake with the potential profit. So, if your maximum possible loss on a trade is $100 and your maximum possible profit is $300, your risk-reward ratio is 1:3. Many traders prefer a risk-reward ratio of 1:3.

Limit the number of transactions per day

The number of trades often does not translate into large profits. Instead, the effectiveness of individual transactions makes the real difference.

After a successful trade and a significant profit, you may be tempted to continue trading, but the market does not work according to your orders. It’s not like you’ll rub a lamp and a genie will appear and bestow you with a perfect trading strategy. After a few successful trades you may start to lose.

Here’s a quick tip: Set a limit on the number of trades you want to open in a single day. Keep up with this plan, and if you feel like opening one more trade, remember that there is always tomorrow.

take a day off

When you lose, you open up positions by letting greed and anger take over. Some traders over trade and place too many failed trades in one day because they are blinded by anger and the need to correct the current situation.

So instead of falling victim to these causes and consequences of over-trading, it is a safer option to take a break to clear your head. As he does so, his anger at the recent loss will subside, allowing him to think more clearly and make transactions more rationally.

set some rules

adding rules for entering a tradeWe will help you avoid placing orders that are not in line with your commercial strategy. Technical or fundamental analysis, or a combination of both, can be used to develop rules. For example, you can create a rule that encourages you to trade only if the 50-day moving average crossed the 200-day moving average.

You cannot control the market.

Traders are trying to gain control of the market. You have to think and genuinely question yourself if you think you are trying to control the market. When you understand and really agree that you have no control over the market, you will start to think differently because you will realize that you have to master a commercial advantage and only trade when the market shows you that control.

Excessive Forex Trading Summary

There will be crazy moments in any trader’s career, no matter what they read or do. Trading requires extreme self-control. If you can handle it yourself, it will show up in your results.

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