Are You Under or Overtrading?

Overtrading in the stock market can be a recipe for disaster. At the same time, under trading is also going to cause you some problems. In order to be successful, you have to come up with a way to find a happy medium between the two. Here are a few things to consider about the frequency of your trading and how to improve it. 

Under Trading

Many traders are guilty of under trading. When this happens, an individual does not take as many trades as he or she should be taking. For example, a trader might be watching the market and notice a potential trading opportunity. Instead of taking the trade, they ignore it. They might decide to avoid the opportunity because they have already reached a certain number of trades for the day. If you find yourself leaving potentially profitable trades on the table, there is a good chance that you are under trading. When this happens, you are leaving money in the markets that could be yours. If you find yourself asking why you didn't take a trade, you are guilty of under trading. 


Another problem that many traders have is that they trade too frequently. When this happens, traders are going to find themselves in some precarious situations. Many times, traders will decide to randomly trade just so that they can be in the market. As a result of this, they often end up taking bad trades and losing a majority of them. Instead of trading just to trade, you should wait until there is a profitable opportunity to do so. If you find yourself trading just to be doing something, you are most likely overtrading.

Personal Style

There is not a specific amount of trades that is suitable for every trader. Because of this, you need to look at your preferences and try to develop a good number of trades to work with on a regular basis. If you are the type of person that likes to watch the charts, you will most likely want to trade more often. If you are the type of individual that likes to place a trade and then do other things, you will most likely have a more passive trading style.

Trading Plan

In order to avoid overtrading or under trading, you need to come up with a trading plan. A trading plan is going to help govern your trading decisions as an individual. You can customize the plan to meet your personal style, but you need to allow the plan to help you make your decisions. For example, the trading plan will tell you when to get into a trade and when to get out. It will help you decide where to place your stop loss order and your take profit order. It will also help you decide if you need to reevaluate a trade and potentially take even more profit. If you stick to the plan, you are most likely going to find yourself trading the appropriate amount of times.

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