18. How to Stop Overtrading

As the title suggests, in today’s episode, we focus our attention on the topic of how to stop overtrading! A lot of the feedback we hear from our community of traders on Youtube is that overtrading is something that they regularly struggle with…and we get it! New traders often enter the industry enthusiastic to start trading and making money – but this enthusiasm can be a double-edged sword at first. Why? Because when you are new and you see markets moving, you want in – you’ve always gotta be in a trade to be a trader right? WRONG – in fact, one of the things we hear quite often from TRADEPRO members is that they are surprised at how little we actually trade throughout the session. And there is a good reason for this! Want to know why? Well, it’s really quite simple – we are only looking to take the highest probability setups – anything else is just noise! But does that mean that experienced traders are immune to overtrading? Not in the slightest – they have just learned to identify the patterns that trigger the overtrading so that they can manage them as soon as they start to surface. At some point, you've just gotta realize..every time I do something it leads to a loss, why would I continue to do more of it and I think that's what overtrading is all about.Click To Tweet So what is overtrading and what are its true costs? Well overtrading in itself is simply the act of taking more trades than you have allotted for in your plan. The true costs for day traders, however, can be split into two main categories: 1.  Financial Costs (Extra Commissions Paid) Paying commissions is one of the costs of doing business, however, getting trigger happy will keep your broker paid and your account in drawdown. As daytraders, we are the most sensitive to commissions which is why we prefer the “less is more” approach to the markets. Sure you can make a bunch of points on a session but there’s a difference between doing so in one or two trades versus clawing your way out with ten or twelve! When you start to focus on the higher probability setups then you will find yourself filtering out a lot of those lower quality setups…which means that you will be more paytient going forward. This means that there may be fewer trades, but the ones that do pass the qualifying process will likely be worth the capital you risk. 2.  Psychological Costs (Ingraining Self-Destructive Trading Habits) More costly than losing actual account capital is ingraining bad trading habits by overtrading and throwing more good money after bad money.  A majority of the time when we overtrade or see other traders overtrade, there is a good chance that those trades did not fit in with the trading plan. In our experience, these trades are often lower quality and lower probability trades that are often the ones affecting your bottom line. By falling into the habit of trading emotionally and losing money you are effectively programming your subconscious mind to believe that closing out a trade as a loser is bringing you closer to safety. And so the self-sabotage cycle begins to unfold until you are mentally drained and considering quitting trading altogether… But there’s hope! We’ve got your back here at TRADEPRO Academy so now that you’re familiar with the true costs of overtrading, let’s talk about some of the common reasons that day traders tend to overtrade and how to overcome this bad habit! So what are the main culprits that we tend to see? Not having a strategy Lack of patience (boredom) A situation where you NEED to make money Overenthusiasm to start Revenge trading (Need to make money back immediately)  If you find yourself struggling to keep control of your emotions while trading, take a good hard look at the list above. Be honest with yourself..do any of these reasons relate to your current experiences? If so, make a note of that, you’re