We all are guilty of this when it comes to online trading currency. Believe me. Over trading for me happens in 2 ways and here they are:
- trading too often in the market
- trading too many positions at once.
I will explain each of these two so you understand what I’m saying.
Trading Too Often In The Market
Trading too often in the market suggests that there is always something going on and that you always know what it is. If you always have a position open, you’re constantly exposed to market risk.
But the essence of disciplined trading is minimizing your exposure to unnecessary market risk.
Instead, focus on trade opportunities where you think you’ve got an edge, and apply a disciplined trade strategy to them.
Trading Too Many Positions At Once
Trading too many positions at once also suggests that you’re able to spot multiple trade opportunities and exploit them simultaneously. I do this and if the trades work out as anticipated, I make a ton of money but when they go the opposite way, I am left with a big massive hole in my forex trading account.
More likely, you’re throwing darts at the board, hoping something sticks. Trading too many positions also eats up your available margin collateral, reducing your cushion against adverse market movements
Be careful about trade duplication and overlapping positions — a long USD/CHF position can be the same as a short EUR/USD or GBP/USD (all long USD versus Europe), while a short EUR/USD and a long EUR/JPY position nets out to be the same as being long USD/JPY.