What are the signs of overtrading and tips to avoid them

Over Trading can lead to financial ruin. However, several self-correction techniques can help you avoid overtrading.

Forex or also known as Foreign Exchange Trading, is an exchange of one currency with another. Although forex trading is highly volatile, it is one of the most active trade markets globally, with a daily trading volume of $6.6 trillion

With increased risks and better chances to earn a high profit, another problem that people tend to go through is over trading in forex trading. 

Over trading is when someone buys or sells forex stocks excessively, leading to financial ruin. There are many studies that state this problem as a psychological issue. However, there are several self-correction techniques that can help you avoid this problem and keep your finances in check. 

The Signs of Over Trading

You might be wondering if forex trading is profitable, given that you could incur massive losses at any time. 

Believe it or not, forex trading can be highly profitable if you take the proper steps and avoid practices like over trading. 

Here are a few signs of over trading you might want to avoid if you don’t want a financial dent in your profits.

  • You are dealing with bad quality trades that are lowering your standard and your profit.
  • You are trading assets in which you have no experience. While it is good to expand your trading activities, it is also important to have proper knowledge before you jump on to a new kind of asset.
  • You are making trades on a lower time frame.
  • You are trading in a tight range that has affected your profits. Always remember, if the range drops down, it is best to avoid trading rather than trading in a tight range. 

It is an issue both experienced and beginner traders tend to go through. And is practically connected to greed. 

If you are indulging in a trading that is way beyond your budget or without a set plan in mind, it’s pretty likely that you are practicing over trading. 

Top 5 tips to avoid over trading

Over trading can be avoided through a couple of methods. 

Here are five tips you can incorporate to avoid over trading in forex exchange:

  • Drafting a Plan

This one is a mandatory step, even if you don’t have an issue with buying stocks excessively. A trading plan, as one may call it, should consist of a description of one’s trading behaviours throughout the day so that the trader remains realistic about their expectations. 

A basic trading plan includes the following-

  • The thing/instrument the trader wants to trade.
  • The specific time of the day when the trader expects to carry out the trade.
  • The approximate profit the trader is expected to make. 
  • The approximate loss the trader can afford. 

  • Avoid trading all-day

When it comes to trading, what really matters is grabbing that opportunity. Moreover, trading for several hours can affect the productivity of the person, which often leads to bad decisions and losses. In fact, the major sign of over trading is when you spend several hours on trading. 

Instead, choose a small time frame when you are the most relaxed and ready to grab the opportunities head-on.

  • Limit your trades/day

It isn’t the number of trades that make the difference. But the individual worth of one stock. So, rather than focusing on trading to the maximum capacity in one day, focus on small but profitable trading that can be worthwhile.

  • Take a break if you incur a serious loss

With trading, it is pretty natural to incur losses. However, we understand that it can be hurtful and push you to indulge in trading even more. 

Unfortunately, that’s not how it goes. Rather than thinking of replacing your loss with a new transaction, take a break. Unwind and relax. Vent out the anger and frustration so that you can practice trading more efficiently than before. 

  • 5. Set certain limits to your trade

If the above-mentioned doesn’t work for you, just simply set a limit to your losses or pay-outs. After reaching the limit, you’ll be automatically stopped from practicing trading. 

Conclusion

Over trading can be quite daunting and can lead to financial ruins while dealing with forex trading. However, to control this malicious habit, you can do things like plan your trading activities, avoid trading all day, set a limit, and take a break in case of losses. Visit this page and know more about the weekly Forex forecasts.