Steps to Overcome Over-Trading in Forex
Over-trading in Forex is one of the most common reasons why most Forex traders fail. In this article, we shall discuss some of the reasons why traders over-trade and how to overcome them. The first reason is Excitement. Many beginners become too excited and become careless when trading. For example, your adrenaline is flowing and suddenly the market spikes and the 5 ema crosses the 14 ema. As it is doing so, you place your trade. Before you made the trade, you forgot that your system relies on the bars being closed. Then the market turned against you and you are now short. And so at the day’s end, you have made five trades to my one trade. It only cost me $30 while you spent $150 for that same trade. So, learn to take a deep breath first before making a trade. Forex trading should not be a gamble but an opportunity to make some money.
Forex gamblers have lost a lot of money because of overexcitement and indiscipline. Trading to cover your losses is another reason why traders over-trade. For example, you had a goal of $1000 for the week and you have a $500 net loss. So you decided to make $1500 today to try to cover your losses. You set up this revenge trade and trade 3 lots instead of your usual 1. You panicked and now you risk losing even more money. Learn to understand that there are always bad days even if you are using a good forex trading system. Trading more money is not a good way to cover your losses.
The next reason for over-trading is overconfidence. Did you notice that younger people seem to be better traders than the older ones? Studies show that the younger traders have lesser ego than the older ones. If you want to be a good trader, leave your ego behind. It is not you who decide if the EURUSD is going up, it’s the market.
Learn to hold on to good trades and exit bad trades. Learn to exit when you reach your goal. Try going for only 50 pips a week. If you try to go for more, greed sets in and go for 100 pips. This results in over-trading because of overconfidence. Learn to make each forex trade exclusive of the other trades you have taken. Forget about the 100 pips loss you made and the 100 pips win you made the other day.
Follow your trading plan and just let the market make the decision for you. If you are always losing money on a currency pair but you are profitable with another pair, don’t fight it. Just focus on your profitable pair and forget about the other pair. However, do not let your ego get deflated either. If the forex market went against you yesterday, that doesn’t mean that the market will also be against you today. Don’t lose hope and don’t over-trade. Patience is the key to become a successful forex trader.
