5 simple strategies to overcome overtrading

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Bulls on Wall Street

Overtrading is one of the biggest account killers new traders are susceptible to. It even plagues experienced traders.

You need to know when to stop, turn off the screens, and walk away. Our minds continue to seek and seek inspiration from the markets while they are open, but as any seasoned trader will tell you, over time, the less likely you are to succeed, the longer you stand on the screens where trades are being placed.

As a trader, you need to be calculated with your decisions and trades and only trade when the time is right. You might want to trade the afternoon chop and try to make some quick buck, or you might want to reclaim your losses from the opening. Whatever the case, these tips below will help you avoid lunch breaks, act too much, and get out of your desk with your mind clear every day.

Establish a routine for yourself

Having a set daily routine like the one in the picture below is the big step in overcoming the over-trade. When you have a set routine and schedule, your mind adapts to those habits and schedules and automatically stops looking for signals and trades that are no longer there after the morning session.

It goes into pause mode at noon and helps you avoid the noon chopped. Establish a routine with strict time frames and activities and you will see the structure of your day translate into more consistency and less over-action.

Take a break from trading

Know when emotions get hot. Often times, it is after a loss in trading when new traders get emotional. This is when traders make the worse decisions. They start avenging the trade to win it back, forcing the trade and ending up in over-bargaining as they trade whatever moves to get their money back. A simple 5-10 minute break will free your mind, begin to look at the markets objectively again and prevent this death spiral.

Set profit / loss parameters

Every day you should keep an eye on the profit and loss parameters. If you make X that day, or lose X that day, sell all or most of your positions and move on with your day. When you meet it early in the morning, walk away from the screens happy knowing you got your job done either way. If you lost, no problem, you managed the risk. If you’ve won, great! Keep going. Knowing when to not trade is just as important as the trades you are making.

Limit your trades per share

Limiting the number of trades on a stock per day can avoid the spin cycle. The spin cycle is when you keep trading a ticker. The more often you trade a stock, the worse your chances of making money from it. We call this the “battle for a share”. When a trader continues to trade a stock just so he can make a profit from it. It becomes a trade based on ego rather than logic.

It’s just the reality of the probability game we’re playing in. Limit yourself to trading MAX one stock 2 or 3 times a day. If you’ve lost multiple bindings it means the setup isn’t clean or you are forcing your input.

Set a timer: avoid the afternoon

This goes hand in hand with setting up a routine for yourself. Set a timer that tells you at this point to leave the screens entirely or to stop looking for new opportunities at some point. Usually we recommend this to be everywhere from 11 a.m. to 12 p.m., especially when the lull of the day sets in and volatility subsides.

Well, it is one thing to know how to avoid trading at certain times, but how do you know what settings to make at the right time? How can you train yourself to pull the trigger on the right trades day in and day out?

This is where our boot camp comes in. Just take it from Islam here, one of our newest students who has recently found consistency in its trading results. He now knows exactly when and why to pull the trigger at certain times of the day and can see from a mile away what to avoid.

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The space in our boot camps fills up quickly. Apply for your seat to see if you qualify!

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