What’s wrong with overtrading?

What’s wrong with overtrading?

Overtrading is a real concern for traders, especially day traders. When it comes to tick trading, where trades typically only last for a few seconds, overtrading can happen before you know it in a matter of minutes. You can literally do 100 trades quite easily in 30 minutes when tick trading options.

So what counts as overtrading

Overtrading is when you are trading compulsively and obsessively, usually chasing that elusive winning streak that hasn’t happen yet or has been and gone. Overtrading is getting carried away with trading,  trading when you know you shouldn’t and not knowing when to quit. Believe it or not, a part of you, your inner voice, is keeping track and you actually know when you are overtrading. It’s just that you might consciously or subconsciously choose to ignore it.

Put it bluntly, when you are losing more than winning, when your account balance is quickly diminishing, you are definitely overtrading.  This can literally happen within minutes with tick trading!

11 trades in 4 minutes
11 trades in 4 minutes

What are the dangers of overtrading

When you are trading with real money, you can literally blow your entire trading account in one session. Needless to say, this can have disastrous consequences for you. That’s why you are always advised to only trade with money you can afford to lose.

Even when you are only trading with a demo account and virtual money, overtrading is still a potential danger that you need to nip in the bud. Trading can give you an adrenaline rush just as you would gambling, especially when you are not following a system or a trading plan. This can be quite addictive.  Once your body is used to getting that adrenaline rush, you would feel compelled to trade to get that rush again the next time. The more you are accustomed to it, the more it would take to get the rush. It’s really not that different from drug addiction.

Besides being addictive, overtrading when demo trading desensitizes you to trading with real money. Once you get into the neural pattern of trading and overtrading, it’s not that easy for your mind to distinguish demo trading from trading with real money.

Not to mention that overtrading can turn your brain to mush, it can impair your ability to make rational and calculating trading decisions.

How to avoid overtrading

Getting into good, healthy trading habits is your best bet for steering clear of the pitfalls of overtrading. Good trading habits mean that you are a “lean and mean calculating machine”. You devise a trading system or a trading plan that will get you more wins than losses. Then, you test out your plan and practice trading with it.  You make sure your plan works. You stick to your plan and trade to win. I have written quite a few posts on planning your trade and trading your plan. Check them out.

Set yourself session goals and walk away when the session is over. Your session could be 10 minutes to increase your account balance by $100. Or your session could be 5 minutes or 10 trades, whichever happens first. Set a daily limit for your session goals too or else you might find yourself having dozens of 10 minute sessions in a day! Remember, when you are trading 5 tick/5 second trades, even 5 minutes is plenty of time.

Most of all, I always advise people to treat demo money as real money. That way, you will develop a sense of caution and respect for your trading stake. You can switch back and forth between demo and real money without worrying about blowing real money. If a comfortable stake for you in real money is $10, trade the same stake in your demo account.


Your awareness of what overtrading is and your ability to recognize overtrading goes a long way to helping you avoid the problem.

Did I miss anything? Feel free to leave a comment below.


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