What is over-trading?

I came across several posts written by members who are worried about over-trading, advocating solutions such as quitting for the day after grabbing 10 pips. I think there is some confusion and irrational fear out there about over-trading. Perhaps there will be some who will disagree, but I see over-trading mainly as jumping in twice or more times on one single setup, instead of trading each setup just once and then wait until your system yields another setup…

Example: let's say you close a trade with profit, then discover that price continues in the same direction and immediately decide to jump in again to scoop up some more pips, but instead price turns against you this time and you lose the profits you just made -- I would call that over-trading.

Though I don't see how it is over-trading if you trade each setup only once, but trade many setups over the course of the day, as long as you're trading according to your system(s) and remain focused and are not tired. It works fine for me. Of course it can also depend on the system you're using, but if your system yields more than one good setup a day, why would you be done for the day after reaching a daily quota from one setup, unless of course you're busy with something else and have limited time for trading? What do you guys think? Is there a general misconception about over-trading or is it just me? Just a bit curious.

If you make more than 5 trades per day you are clearly overtrading.

When it makes you feel sick...

(Responding to OP) I think you have answered your own question, if you have a setup, you take it, there is nothing wrong with this. 'Overtrading' is only another symptom of not being able to properly quantify your setup (like 'Revenge Trading').

Nothing more needs to be said.

I think is those people who trade by "luck" (aka "gut feeling") ... and I guess the basic concept is to "not disturb the karma", for those people, one trade is over-trading.

I agree with Craig and AstonDan. Unless you have reason to believe that a setup is potentially less profitable than another, then there's no reason not to trade it. If the market has exceeded some statistical range for the day, then that could be valid reason to shut up shop, but that should likewise be reflected in the rules that determine the validity of such a setup.

Obviously the market doesn't care how many trades one retail trader has made. Believing that one should quit after so many trades is trading one's account, not the market. It's like the gambler who believes that his 'lucky streak' is about to run out.

What if you do automated triangular arbitrage?

Over trading is a term coined by the weak minded who trade with emotion and are looking to place a label on their failure.

For me over-trading happen when I am really tired and instead of walking the f... away from the screen I keep on trading. As long as I am awake and focused I feel like I can take as many trades as I want. Not being at your best, physically and mentally, even if you took just 1 trade would be considered over-trading in my rule book.

If your trading plan requires you to trade 100 times per day but you only make 50 trades, then you are under-trading.

if your trading plan only need you to trade 1 time per week but you trade 1 time per day then you are over-trading.

Thanks for all the input. Again, I was only curious why someone would limit themselves like that, confirm my suspicion that it’s due to superstition, as I can’t understand the practical application to stay away from perfectly good setups, because you already reached your daily quota.

Someone wrote maximum 5 trades a day here. What time frame is that and why 5 trades? Last Thursday (or was it Wednesday), I did almost 30 trades on the 10 second EU chart, where half were breakevens, a few 1-2 pip losers and about twice as many 1-5 pip winners and one runner that went 20 pips before I closed at the first sign of weakness.

I had a similar trading day like that last year, but this time the runner I caught shot up 40 pips in less than two minutes and I decided to set my stop to b/e and wait for the hour candle to close and manage the trade from there, then stayed in another hour and was floating about 90 pips in the green, when I checked the 3HR chart and noticed that I had entered a few pips above the very bottom of a hammer candlestick and possible swing low on the second wave of an uptrend. I left my stop at b/e (didn’t even bother to trail it) and left the trade running for 5 days before I closed with 450 pips profit, initially risking a mere 2-3 pips. My first and only swing trade ever and my first and only over-weekend trade ever.

Now, I keep hearing warnings about not exposing yourself too much to the market, but if I didn’t, I would be less likely to catch those runners. I have heard many say that scalping the small time frames cannot be profitable and now I’ve (indirectly) been told that I’m over-trading, yet trading is working out better now than when I was trading off the 30/60 min charts when I first started with currencies a year ago. I guess that’s just my experience. Again, I was just curious, have nothing to prove regarding my trading style. Just making conversation.

I won’t be posting and contributing much here, so here’s a small tip (some may have heard something similar) before I go, about faking it until you make it: If you don't already have a net worth of a million dollars, pretend that you already are a millionaire (NOT GOING TO BECOME ONE DAY) and REALLY, REALLY believe it. Why? Because the 2nd million will always manifest with less time and effort than the 1st.

Good luck in your trading folks.

Amen.

You are never overtrading if you are trading in accordance with your system.

I don't agree with this; additional and relatively spontaneous trades aren't necessarily bad trades. I would class overtrading as the point when someone starts adding new trades that don't effect performance positively.


Not true. Let's say I create a system where I buy on an uptick, sell on a downtick. I might be following my system, but I'm also sure as hell overtrading. Extreme example, the same could be applied to any system, to a lesser extent.

The fact is that pretty much everyone is overtrading or undertrading. Neither of these mean much without considering the extent, as the best traders will still under/overtrade, they're just likely to do much less of either than the rest of us (as they're better at spotting profitable opportunities). Undertrading may be worse than overtrading, as it suggests that the trader is leaving a lot of money on the table by missing opportunities. I'd prefer to slightly overtrade than significantly undertrade.

If you make 100 trades per day, with a minimum of 2 pips of spread/comission at open a trade plus 2 pips at close: 4 pips per trade * 100 trades = 400 pips!!!

You lose 400 pips per day only for trade! What method gives you more than 400 pips at day? HAHA If your method make 100 trades per day the only benefited is your broker.

I consider that to give 4*5=20 pips per day to your broker is enough, if I could get 20 pips at day I would be rich!

That has to be the stupidest counter example in the history of the Internet.

Let's say I create a car where the brakes are automatically applied every 10 meters, I'm driving the car properly, but I'm sure as hell stopping a lot!

Let's say I create a plane where the wings fall off after half an hour, I'm flying the plane properly, but I'm sure as hell crashing a lot!

20pairs x 20 pip per pair = 400pips. Is it possible?

btw you may get 20 pips per day but the question is can you do it everyday? if not you are far from being rich!