How to get rid of over trading

 Forex Is So Risky :
One of the most frequent mistakes when it comes to trading, on any market, not just Forex it’s over trading. Over trading can lead to substantial losses when the market is not clear enough. But the other extreme isn’t that good either, trading less frequently when the market has clear market conditions can stop us from reaching our goals on a monthly basis.

There is no “right” amount of trades to be made on one particular day, week or month! I guess that depends on each trader and the methodology each one of them is following. But we know something for sure: If you are consistently losing money it’s because:

1. You don’t have a complete and sound strategy (or not following it). This includes using money management, risk and trade management, entry system, SL and TP orders, etc.
2. You are Over trading. You are trading with more frequency than you are supposed to trade.
3. You are not taking advantage of the opportunities offered by the market. You are trading with less frequency than you are supposed to trade.

In this article we’ll focus on the latter two.

Over Trading :

You are over trading when you are taking more trades than you are supposed to take. Traders make this mistake when they feel overconfident (i.e. think you are better than your system), they don’t trust their methodology, want to make a quick gain here and there, they are just following other`s advice, etc.

Sometimes traders tend to focus on the profit potential and don’t take in consideration the risk involved on a particular trade, this leads them to take more trades than they should. On the other side, professional traders follow their strategy because they know that only when their system signals a trade, the odds are on they favor, and they just take advantage of it.

Other times, especially for novice traders, when they are not trading they feel like they are doing nothing, so they just take a trade to make them feel they are doing something, even when their trading capital is at stake.

You need to remember that being on the sidelines is a trade decision, you are preserving capital. For instance, let’s consider these two scenarios:

A.    You are eager to trade, your system doesn’t signals a trade and you decide to enter. The market goes against you and stops you out.
B.    You are eager to trade, your system doesn’t signals a trade, and you stay on the sidelines.

On scenario A, you lost money, while on scenario B, you preserved capital. So being on the sidelines is actually a trading decision that could help you reach your goals on a monthly basis.