Over trading is a big urge that many traders have. It is a process that many traders go through, especially beginning traders. However, it can inflict even experienced traders from time to time unless they can catch themselves right in the act and take the steps necessary to remove the urge, and replace it with calculated order flow accurate thinking.
Beliefs and Expectations
Most people have typically grown up where family and friends have taught them that you need to work hard for your money. Some people believe that you need to do physical, manual, backbreaking labor in order to earn more money. Some people were taught that if you did not earn money by the sweat of one’s brow, then you don’t deserve it. Other people were taught that money doesn’t grow on trees.
Everyone has all sorts of these psychological issues to deal with in order to break through to trading, and order flow trading success.
The way these psychological issues manifest themselves in trading, is that you may have the belief that you need to “work” harder in order to make more money trading. And working harder typically means placing more and more trades. Eventually you get to the point where you start placing trades that are not high probability. You place trades based on random whims and not sound trade planning.
And this is very difficult for a lot of traders to break through. Because if they stop over trading, then that would be going against the principles instilled in them by their environment. They would be going against the belief that you need to work “hard” in order to make more money. And who would want to go against their childhood teachings that could make sense for a lot of people.
I am not saying that you shouldn’t believe in hard work – you should. But work smart, and work on the things that can generate order flow, for example option barriers. I don’t mind working hard, as long as the process is structured in a certain way so that I know I am doing the work that can generate order flow and move the market.
Exploiting Market Inefficiencies
Other traders believe that if they aren’t placing a lot of trades, there are not fully exploiting the market. And many trader want to feel that they are working hard exploiting any inefficiency they can find. Well, no one, not even a big macro hedge fund, or a high frequency trading program can capture all the trading inefficiencies. It is impossible. George Soros, the global macro hedge fund manager, has missed out on so many macro moves over the past 20 years, I have lost count. Jim Simons, the quant, has made billions of dollars, but has not made money every year. It is impossible to catch each and every single inefficiency, for human emotions and decisions between thousands and millions of people can be so complex, sometimes rational, other times irrational. Which is why their are plenty of stop hunting and news trading inefficiencies that have been available for years for anyone who puts in the effort to find them and grab the profit from the global money flow. Just don’t try to use a news trading expert advisor.
I have had insanely profitable months where I only placed one trade for the whole month.
The months with my worst performance typically involved myself placing some half assed day trades based on flimsy order flow evidence and extremely shaky market feel of the situation.
So you may ask what is the solution to over trading in the forex market?
Over Trading Solution
Embrace the trading volatility. Embrace the fact that trading less can actual mean more money. Embrace the fact that system hopping between trading strategies that do not generate order flow is a dead end.
I had kept a trading journal and reviewed it periodically. Eventually there is overwhelming evidence for trading less equaling more profit, assuming you place the right order flow trades and put some decent size into them.
I would look at my trading months where I placed thirty trades. Perhaps I would break even, or squeak out a gain of a few %.
Then I would look at my trading months where I places less than five trades. The performance difference was truly staggering. Trading less can equal more money, a lot more money.
Not only that, but managing thirty trades during the whole month is a lot more demanding on the body and mind that managing just a few trades per month.
So you could make more money, while also reduces the stress related to trade management. It is a win win situation.
Over trading urge gets removed, because at the end of the day I am not searching for more stress and less money. I am searching for profits, while making the process as easy and effortless as possible.