Most newcomers, after joining the Forex market, choose day trading to earn their initial money. While day trading, newcomers’ most common problem is they cannot understand how much they should trade. Thus, they often end up overtrading, which most of the time brings about nothing but losses and career destruction.
Why Traders Should Trade Less
This article will give you some reasons why you should not engage in overtrading. Let’s begin:
1. Emotional Turmoil
When a person is about to lose his money or understand that his asset is at stake, he cannot but gets emotional. Newcomers who don’t know how it feels to lose money or to invest money in the uncertain market environment will find currency exchanging an emotionally draining endeavor. The price movement will sometimes make traders undergo excitement, hope, fear, and confusion for every trade.
When a trader is day trading, he is engaging in multiple contracts within a day. The number of contacts may vary from 5 to even 30 or 35. It will feel to him like several roller coaster rides. It will just imbalance his rational mind and lead him to make some unnecessary decisions. These decisions will evoke losses.
2. More Missed Opportunities
When a trader sets for overtrading, he has to end trades pretty early. Even he has to set shortstops. It often happens to the day traders that they have set tight stops and then seen a trade going in their favor. Most of the time, such cases make them be satisfied with fewer profits, even if the trend is on their side.
Quality is always important than quantity. They should remember this motto and do accordingly. They should avoid placing more orders and instead set higher stops for the more certain trades. Visit https://www.home.saxo/en-sg/products/forex and know more about the optimum trading condition. As you gain knowledge, you will slowly stop to overtrade the market and this will definitely increase the chance to become a successful trader in Singapore.
3. Less Focus on the Management
While overtrading or engaging in more trades, among many other things, they happen to ignore one basic aspect of exchange business. It is trade management. It won’t be an exaggeration if anyone says that trade management makes 70% of someone’s trading success.
Proper trade management includes
- Market Analysis
- Risk Management
- Time Management and
- Money Management
If any trader wants to reduce the loss projected, he needs to spend more time managing the trade. It will not let him place extra orders.
4. Exploit Other Options
The Forex market gives an opportunity to make money in different ways. Newcomers, being totally unaware of all the alternatives, choose to make extra money by sitting on their chairs and looking at the price’s course. Initially, for anyone, this can be a viable method to earn money. However, professionals and experts guide to follow the opposite way.
Traders should determine a transparent goal first to discover the best method of currency business or the most suitable way to reach their dream. Financial freedom or making a living out of a contract can never be achieved by being irrational and trying to dry out the market by overexploiting it.
5. Position Sizing
Without increasing one’s position size, none can cut a big amount from the market. Optimization of the size of the position can maximize one’s return. However, knowing when to increase the size is important. Anyone who has been meeting his monthly objective of 6% every month for about 6 to 10 consecutive months should expand his position size.
The only requirement that a trader should meet is to be consistently profitable.
Overtrading is detrimental to a trader’s career in many ways. The cleverest approach would be to lessen the overall quantity of trade and focus on the long goal instead. By adopting a slow but wise approach, traders not only can set themselves for more important tasks but also, they can be more profitable eventually.