Will fast tick trading lead to overtrading?
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Will fast tick trading lead to overtrading?

There are a number of different contexts for overtrading when it comes to trading forex and options. We are not talking about “churning” trades for the broker to make a fortune in commission. Rather, we are dealing with a very different form of trading here – tick trading options in micro time-frames.  It’s all too easy to overtrade since each trade takes only a few seconds. You can literally have hundreds of trades in less than an hour.

Generally speaking, overtrading is a no-no. It is excessive, compulsive trading that usually ends in blowing one’s trading account all too quickly. We certainly don’t want to do that.

So is it ever OK to overtrade?

The short answer is yes! With a caveat though. It’s OK to “overtrade” if you are demo trading and when you are working on coming up with a trading strategy or testing a trading strategy.

The beauty of tick trading with the BonusTrade app is that each trade only takes seconds. So you can actually come up with a strategy and test it to see if it works in a matter of minutes.

Trading strategies, whether it be for longer timeframes or micro timeframes, are largely predicated on finding and recognizing patterns. For tick trading, all you have to go by is price action – how the price moves, the pattern it makes, or lack thereof. Once you think you see a pattern that gives you a good indication as to where the price will move next, you’d want to test it extensively to see when this pattern works and when it doesn’t. This calls for a lot of testing and a lot of trades!

Getting the most out of “overtrading”

To get the most out of your strategy testing and “overtrading”, you need to be very methodical. You should document or note down the exact pattern and the exact strategy you are testing as soon as you have found the pattern and formulated the trading rule.

For the testing phase, make a note of the time you start your test. Do not deviate from the hypothesis or strategy you are testing or else your test results would be tainted.

While you can draw conclusions from just dozens of trades, hundreds would certainly be better. Luckily for tick trading, it is possible to rack up hundreds of test trades in a very short time.

Be sure to spread out your testing at different times of the day and different days of the week as well. Also test your strategy on various assets and currency pairs. You may very well find that the killer strategy that has given you 10 consecutive wins only works on some assets and not others, and only when the market is trending.

The caveat

When you are demo-trading and testing a strategy, you are effectively also training and conditioning yourself to spot patterns and to react quickly to the patterns. This is a double-edged sword that can get you into the bad habit of overtrading when it comes time to trade for real.

What can you do about that?

You just need to be very methodical in your testing. Don’t worry, you can likewise train yourself out of bad trading habits.

Here are the testing stages you should stick to:

  1. Find pattern.
  2. Formulate trading rule with pattern.
  3. Apply this rule to test trades.
  4. Review results to see if it works (set criteria e.g. 75% or better win rate)
  5. If it doesn’t work, either discard and forget, or tweak and try something new.
  6. If it works, go to the training phase with this strategy.

In the training phase, you pretend you are trading for real with real money! Have a target $ win in mind for the session and always set a time limit and stick to it.

When is it not OK to overtrade?

In spite of what I said just now, it’s never a good idea to overtrade as a general rule.

Overtrading can turn a shrewd, rational and calculating trader into a compulsive gambler and trading addict. There is a very fine line between the two.

As you can see, even if we indulge in “overtrading” in the name of strategy testing while demo trading, you absolutely still need to be very disciplined to make sure that you make the most of your “overtrading”. There is also the real danger of getting into bad trading habits when doing too much demo trading.

The antidote

There is indeed an antidote to potential overtrading:

“Plan your trade and trade your plan.”

This goes for both demo trading and real money trading.

To get started with your trading plan, answer the following questions and play around with the numbers:

  • How much do you want to make?
  • What stake will you be trading?
  • How many trades and what win rate will get you to your trading goal for the session?
  • How long should you trade?
  • What to do if you don’t make your trading goal?

You should have a master plan and a session plan.

Limit your trading session to 10-15 minutes at a time whether demo trading or trading for real. Believe me, trading for 15 minutes can be very intense and mentally exhausting if you focus your attention on it. It can also be emotionally draining when you are trading with real money.

You might want to check out my other article on demo trading, Demo Trading – The Paradox of Virtual Money.

Have you downloaded the BonusTrade app yet? You get a free $10,000 virtual money demo account as soon as the app is installed. No sign up necessary.


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