Being a Currency trader you're going to need to develop several skills together with developing reactions to different trading scenarios. Sometimes this is often easier said than done. After helping hundreds of traders, I have noticed that most of them don't succeed at Forex strategy trading for precisely the same reason, they over-trade. So how do you know when you find yourself over-trading? Here’s a quick guide that will assist you recognize if you are over-trading and how to stop it.
How many strategies are you currently using?
I’ve met individuals that were trading between 5-10 different strategies not to mention there were not making any money, but why is that? Well, apparently the more strategies you utilize, the less you concentrate on the Forex market market itself. Getting to know the market and your strategy is important to becoming profitable and consistent, but this is impossible to do when you've got 3, 5, or 10 different strategies to pay attention to.
How much are you presently risking on every trade?
Knowing how much you’re risking is a lot more important than understanding how much you’re going to make. That is why money management is really important. I know of traders go from the losing side to the profitable side simply because they implemented money-management to their trading.
How do you feel when you’re making money?
The most prevalent response to this question is fantastic, and many individuals don't realize they've become greedy until it's already happening. As human beings we usually tend to get greedy when situations are running smoothly for us. I’ve been there, done that, and the result was not good. Once you get greedy you are more likely to act reckless and commit mistakes.
After asking yourself these questions you should have a better understanding of where you are. Over-trading can be as harmful as using a strategy with a low ROI (return on investment). Now let’s discuss how you can prevent yourself from over-trading.
Employ a trading plan: you should always know where you are going to exit a trade BEFORE you even enter it. Also, be sure you have a set of rules set up for other trading variables like take profit levels, stop losses, and progressive TPs.
Discover more about your trading style: this is extremely important because the type of MM (money management) you utilize for one trading style is different than the one you use for another one. If you're a scalper you'll likely use small percentages in each trade (0.5% to 2%) since you are taking so many trades. A swing trader might use a bigger percentage like 3% or 4%, it all really is determined by your trading style and Forex strategy you use for Trading. Because of this, learning more about your trading style will help you to become more effective as a trader and take better decisions.
I will be posting more tips about how to avoid over trading and more forex strategy trading tips on a future article, thank you for reading and happy trading!
All the best,
Jay Molina
Advanced Forex trader & educator
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