Rookie traders often think that overtrading is the only way to make a big profit. But they don’t realize the fact that to earn more money they need to trade less. By the time they realize this concept, it is too late and they have already lost a huge amount of money. To become a profitable trader, you must learn to stop overtrading the market. If you keep overtrading, it’s just a matter of time before you lose control of your grip and start making regular mistakes.
Today, we are going to discuss some amazing techniques by which you can solve the problem of overtrading. Go through this article very carefully as it will improve your decision-making ability and let you trade with confidence.
Aim for smaller gains
The novice traders often ignore the basic rules of investment business and they trade with big lots. Eventually, they become frustrated when they lose a certain trade. They start trading more and more just to recover the loss. Instead of placing big trades, you should be aiming for smaller gains. By doing so, you will keep the risk exposure low and thus you will be more confident with your actions. Even if you lose few trades in a row, you will not be under heavy mental stress to recover the losses. So, choose your lot size very carefully as it contributes to the problem of overtrading.
Trade in the higher time frame
The professional traders at Saxo always love to trade the market in a higher time frame. By choosing the higher time frame you can reduce the difficulty levels at trading. For instance, you don’t have to deal with too many false spikes or frequent reversals in the trend. If you evaluate the trade signals in the higher time frame, you will be taking the trades at the major support and resistance level. Moreover, the trend will be in your favor most of the time. On the contrary, if you prefer to trade in the lower timeframe, you will be dealing with multiple false signals and thus you will keep on losing money.
Trade with discipline
One of the key reasons why novice traders are losing money is overtrading. Overtrading is a serious problem and it is one of the prime reasons for which people trade too much. You should create a trading journal and stick to it. When you start writing down the details of each trade in the journal, you will make fewer mistakes. Most importantly, you will never feel the urge to deal with the low-quality trade signals. Try to trade the market by following a specific trading routine as it will help you to make a wise decision regardless of the market conditions.
Learn to trade the chart pattern
Most people overtrade to earn more money. Instead of doing that, you may learn about the chart pattern trading strategy. Chart pattern trading is by far the most effective way to make money in the retail trading industry. If you carefully look at the market variables, you will realize the fact that losing trades are nothing but the reflection of weak decision. So, if you manage to learn about the chart pattern trading strategy, you can predict the potential direction of the trend with much more accuracy. This will significantly improve your decision-making skills and let you trade the market in a much more standard way.
Trade with less than 1% risk
Those who are suffering from the problem of overtrading should trade with less than 1% risk. If the risk factor is above 1%, a trader is most likely to lose money and become more agitated to recover the loss. On the contrary, when the risk factor is below 1%, traders will get a unique chance to deal with their risk factors. Thus they can manage their trades in a much more standard way. Eventually, they will start focusing on carrying out quality trade executions.