It happened to all of us. You place new trades one by one and try to follow the trading plan, but your bankroll is fading away. Overtrading in Forex is the negative process when a trader opens new trades with high volume to compensate for past losses. It usually leads to high-risk orders without any risk management system, so the trader loses his deposit. Preventing overtrade in Forex is essential to a trader's success, so he has always to remember this point.
What causes overtrading in Forex?
A pool of negative emotions, such as greed, frustration, anger, excitement, and especially fear of losing money, usually cause overtrading. Excessive buying and selling on emotion make open unprofitable trades that may be dangerous to your portfolio.
Risks of Overtrading
Overtrade is a whole heap of problems that lead to harmful consequences. This list may range from spending much on fees, opening dozens of stupid orders without analysis, complete loss of focus, and discipline that pushes the trader into total TILT. It can blow up your deposit in the worst case, so you should avoid overtrading using our solutions.
Reason 1. Need for Money
If you urgently need money, you are ready for anything to get it. You ignore your trading strategy and enter more and more risky trades in order to gain the maximum profit right away.
What to Do
If you don't follow your trading plan then Forex trading becomes a casino game. Don’t expect quick and easy profits in the foreign exchange market. Don’t invest money that you cannot afford to lose. Try to find funds from another source. Return to Forex trading when your financial situation is more stable.
Reason 2. Excitement
Many traders come to Forex in search of thrills. Profit from trading is not their number one priority. The trader opens more and more trades to tickle his nerves and gets into a real addiction, like in a casino.
What to Do
Reconsider your motivation and focus on the technical side of trading. Make decisions with a cold mind and adhere strictly to your system. This will help you improve your performance which will bring you even more satisfaction.
Reason 3. Lack of Strategy
When you don't have a clear plan to enter the market, you start to open trades at random by following the trend. At the same time, you continue to buy when the market turns down and vice versa.
What to Do
Create a clear plan to enter a trade. Write it down on a separate sheet and keep it in front of your eyes. Make it in a form of a list where you can check the compliance of each point with your potential trade. If at least one moment doesn’t match then don’t open that order. Forex will offer you many more trading opportunities.
Reason 4. Trading Out of Revenge
Every trader will inevitably face losses in Forex. You can even get caught up in a losing steak and close up to 10 negative trades in a row. At such a moment, there is a desire to urgently recoup and cover the losses. You start trading out of revenge, not for profit.
To speed up the process, you deviate from your plan and open as many trades as possible. It seems to you that this will increase your chances of success. However, the result is usually the opposite.
What to Do
Fighting the urge to recoup can be difficult. Take a break to calm down. Close the charts and clear your head. Do something you love, hang out with family and friends, have some tea, or take a walk. Return to trading when you are ready to make decisions without getting emotionally involved.
Big losses will be depressing. However, with proper risk management, income from successful trades will offset losses from negative ones. Follow your plan and soon you will gain profits.
These are all the reasons for today. Try to track if you have encountered any of them. We will talk about the rest of the reasons next time.