Is overtrading a necessary stage? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Looking for 'necessary' items of technical analysis 4 replies

Backtest Data Timeframe > 1min, 5min necessary? 2 replies

How many blow-ups are necessary in order to become a pro? 23 replies

Are stop orders necessary in EA? 4 replies

Is overtrading a necessary stage?

  • #1
  • First Post: May 17, 2011 9:57am May 17, 2011 9:57am
Dear All,

For successful daytraders with high self-discipline, it is important at some stage before being successful, they have overtraded a lot before they can gradually grasp the operational skills to trade with good quality?

Please share your views.

cheers,

kk007
  • #2
  • May 17, 2011 11:15am May 17, 2011 11:15am
Quoting kk007
Dear All,

For successful daytraders with high self-discipline, it is important at some stage before being successful, they have overtraded a lot before they can gradually grasp the operational skills to trade with good quality?

Please share your views.

cheers,

kk007
Since most beginners focus on the return and not on the risk, it is inevitable that they overtrade. I think changing that focus is the real challenge for most.
  • #3
  • May 17, 2011 11:45am May 17, 2011 11:45am
It is usually a necessary stage that most traders go through. Although not all of them.

Whether a trader goes through it kinda depends on what their beliefs and expectations are when they initially get started with trading.

If they have a belief that there is this work-money link, and they convert that into trading to mean trade-money link. In other words they believe that in order to make more money trading, they need to "work" harder and for many people that means placing more trades.

So those people are destined to go through the overtrading phase, because if they do not place a lot of trades, then they feel they are not "working" hard enough.
Private message me for a link to my order flow website.
  • #4
  • May 17, 2011 11:53am May 17, 2011 11:53am
I guess there may be different definitions or types of overtrading, but imo 'revenge trading' (trying to quickly make up for a loss) can be a good tool for learning to accept losses for what they are and move on instead of trying to get back at the market for being wrong.

Don't think it's necessary for everyone, though. Certainly some systems or types of trading lend themselves to overtrading more than others (I doubt many position traders overtrade to the same extent that newer traders trying to daytrade do).
  • #5
  • May 17, 2011 12:44pm May 17, 2011 12:44pm
Quoting kk007
Dear All,

For successful daytraders with high self-discipline, it is important at some stage before being successful, they have overtraded a lot before they can gradually grasp the operational skills to trade with good quality?

Please share your views.

cheers,

kk007
Your trading plan with daily objectives should dictate when you are done for the day. So what is your daily pips target. Or maximum pips loss that you will tolerate.

Traders I know, myself included, would stop trading if they had two losses in one session (tells you you are not in the zone)......... or if any trade met the daily pips objective. Why carry on if you have what you planned.

Keep your daily pips target realistic (related to the market that you trade) and just increase stakes as bank increases or/and when consistent at getting XX pips per day.

Be in control and follow your trading plan.
If you cannot do that you should be working out why you are out of control and recognising that you are not following the rules you have set yourself.

And if you don't have a trading plan get one crafted to suit you and your schedule. Then monitor and analyze your performance against it.

makingpips
  • #6
  • May 17, 2011 12:58pm May 17, 2011 12:58pm
I don’t think it’s a necessary stage that a daytrader has to experience. That’s wording it as an absolute, and there are few absolutes in this world let alone in trading. IMO, it’s more of a strong tendency. Most daytraders probably will have to deal with it, and develop the discipline to not overtrade, before they become successful.

But for others the fear of losing money can be a bigger problem, and actually keep them from pulling the trigger as often as they should. This could still be looked at as a discipline problem that needs to be overcome if they want to be successful. But the discipline problem in this case isn’t overtrading.

It’s might also be possible for someone to learn this type of discipline elsewhere, and then bring it with them when they start trading. In this case the “hard lessons” will have already been learned, and the new trader can start executing their plan correctly, relatively early on. But I'm mostly just brainstorming at this point, and certainly don't have data to back it up.
  • #7
  • May 17, 2011 1:46pm May 17, 2011 1:46pm
Quoting Pips_Cruiser
I don’t think it’s a necessary stage that a daytrader has to experience. That’s wording it as an absolute, and there are few absolutes in this world let alone in trading. IMO, it’s more of a strong tendency. Most daytraders probably will have to deal with it, and develop the discipline to not overtrade, before they become successful.

[font=Verdana]But for others the fear of losing money can be a bigger problem, and actually keep them from pulling the trigger as often as they should. This could still be looked at as a discipline...

Interesting points. I actually think that people who fear the markets and losing money will do much better than people who overtrade. In my opinion the markets are highly addictive for most participants until they forget the aim why they trade (profits). They will tend to trade for the rush. Getting away from being such an "adrenaline junkie" is the difficult part I think. It was at least a challenge for me.

All just my opinion of course.
  • #8
  • Edited 2:34pm May 17, 2011 1:55pm | Edited 2:34pm
Quoting Pips_Cruiser
I don’t think it’s a necessary stage that a daytrader has to experience. That’s wording it as an absolute, and there are few absolutes in this world let alone in trading. IMO, it’s more of a strong tendency. Most daytraders probably will have to deal with it, and develop the discipline to not overtrade, before they become successful.

[font=Verdana]But for others the fear of losing money can be a bigger problem, and actually keep them from pulling the trigger as often as they should. This could still be looked at as a discipline...

No data , just me. ,

I found overtrading a big problem when i first started out...overconfidence and lack of experience with techs., fundies and rr/mm.

The discipline lays in the pocket....cant afford the trade dont do it..
i wish that it hadn't been a neccesary stage for me, but i have the disability of having to learn from my mistakes.


PipsCruisers comments are well worth taking note of.
All systems of divination, like music itself,work through patterns.
  • #9
  • May 17, 2011 10:13pm May 17, 2011 10:13pm
Thanks a lot for the opinion above. They are really rich. I can try to summarise the above points.

- Overtrading is a discipline-related issue
- It is something people need to learn to prevent
- Cautious trading may be against beliefs from other aspect of life (e.g. work hard (i.e. place trades) to earn during trading session)
- They may have failed before successfully learning the lesson
- Plan and daily objective can help to regulate operations and cultivate discipline
- The psychological need to compensate for losers can cause revenge overtrading

And finally, I will add this.

- The lack of patience to wait is one main cause of overtrading
  • #10
  • May 18, 2011 4:51am May 18, 2011 4:51am
Lets define the act of overtrading as trading without having a genuine positive expectation. So, that anyone who trades without an edge is engaging in overtrading.

Emotional factors such as overconfidence (possibly originating from a winning streak) may lead to overtrading. This is an example of the discipline related issue you are talking about.

However: overtrading is much bigger than this, and there are many non-discipline related roots involved. Let me emphasize again: for trading not to be overtrading, one needs to have a positive expectancy. In order to be sure of a positive expectancy, you need a statistically significant edge. The level of significance for which one is willing to accept the edge depends on personal preferences. I am sure that many trades are initiated without having a significant positive expectation, regardless of whether people trade once a month or five times a day. The quantity of trades is not necessarily related to overtrading.

To conclude, it is better to undertrade than to overtrade, i.e. to skip trades that would have had a positive expectancy than to enter trades with a negative expectancy.
The nail that sticks out gets hammered back in
  • #11
  • May 18, 2011 5:35am May 18, 2011 5:35am
I think overtrading is based on:

1) the approach, 2) no defined rule set and 3) adrenaline rush.

If a scalper where to take 10 trades per day they 'tecnically' could be considered undertrading, where as if he where to take 100+ trades/day is he be over/under trading?

I think the essence of under/overtrading mostly has to do with the style and most of all with weakly defined rule set.

If you know when NOT to trade, then (discipline aside) you know at what point you begin to overtrade, and that is when your plan/setup parameters dictate you shouldnt be trading.

My random thoughts only...
  • #12
  • Last Post: May 18, 2011 5:57am May 18, 2011 5:57am
Quoting kk007
Dear All,

For successful daytraders with high self-discipline, it is important at some stage before being successful, they have overtraded a lot before they can gradually grasp the operational skills to trade with good quality?

Please share your views.

cheers,

kk007
to avoid overtrading you need to change your way of thinking. Before placing your trade think - how much can you lose, before how much can I gain.
0 traders viewing now