Are you Bleeding Capital or losing Profits? You may be rushing into too many trades, leading to possibly more than one trading demon to infect your hard-earned Capital.
How many trades is overtrading?
Well, the answer to this question differs depending on the trader. A swing trader will trade less than a daytrader. It is by design.
When any style of trading starts trading too much, it can lead to a domino effect. You may begin to lack focus, become frustrated over a loss, start revenge trading, and much worse… too many demons will lead to an account blow up.
We will prevent overtrading from occurring and reign in the trading demons it creates.
First, figure out your style. For example, if you work during the day and can only trade in the evenings, your style adapts to your schedule. You would start with swing trading.
If you have extra spare time, you will make more trades. Maybe even do more short-term trading. It is always wise to start with the longer timeframes and gradually move into day-trading. However, we are going to assume you want to jump straight into the action.
Second. Determine risk.
Risk is not scary. Suppose you cannot handle the mental state. You will find many troublesome obstacles in your path as a trader. Do not worry. Anyone can master this skill with time.
Without going into a very long post about risk, take the Capital you wish to trade with and split it in half. Deposit half to the exchange or broker you want to place trades on, and keep half in your reserves or another account. What this will allow you to do is give you a safety net. You can only lose the $ amount of what you send to one of the trading accounts.
The second half may be allocated as savings or a more extended timeframe trading account. You should feel more at ease mentally, with just this one of many tactics you could have used.
Third. Realize you can only control the size of your position, entry, and exit.
When someone new first gets started trading, I always tell them to look for winning trades first. Then exit once they make a 2:1 reward. You want to build your confidence and gain a feel for the market. A process like this is something you can always revert to if you become infected with a trading demon.
There is no need for advanced techniques when you allow emotion to interfere. Meditation is something to consider as well.
The point is, allow yourself time for the trade to play out. If you entered a short term trade respect the profit you made and exit. If you entered on a 4 hour chart, give the 4-8 hours to play out, and so on.
I hope you enjoyed this article, and I hope at least one of these steps helps solve your problem. If you want to learn more, please visit us on our trading platform.
Here you can talk to other traders and use skilled widgets ranging from stock screeners to profit/risk calculators.