Being a Forex trader you’re going to need to develop many different skills together with developing reactions to various trading scenarios. Sometimes it is easier said than done. After helping hundreds of traders, I have noticed that most of them don’t succeed at Forex strategy trading for the exact same reason, they over-trade. So how do you know when you’re over-trading? Here’s a quick guide that can assist you recognize when you’re over-trading and the ways to stop it. How many strategies are you currently using? I’ve met individuals that were trading between 5-10 different strategies and of course there were not making any money, but why is that? Well, apparently the more strategies you use, the less you concentrate on the market itself. Getting to know the market and your strategy is important to becoming profitable and consistent, but this really is not possible if you have 3, 5, or 10 different strategies to pay attention to. How much are you presently risking on every trade? Understanding how much you’re risking is incredibly more important than understanding how much you’re going to make. That’s why money management is really important. I have come across traders move from the losing side to the profitable side just because they implemented money-management into their trading. How do you feel when you’re being profitable? The typical response to this question is great, and many people don’t realize they’ve become greedy until it’s too late. As humans we are inclined to get greedy when situations are running nicely for us. I’ve been through it, done that, and the result was not good. When you get greedy you are more likely to act reckless and commit mistakes. After asking yourself these questions you should have a much better idea of where you are. Over-trading is often as harmful as using a strategy that has a low ROI (return on investment). Now let’s talk about how you can prevent yourself from over-trading. Employ a trading plan: you should always know where you are going to exit a trade BEFORE you even enter it. Also, make sure you have a set of rules in place for other trading variables for example take profit levels, stop losses, and progressive TPs. Discover more about your trading style: this is very important because the type of MM (money management) you employ for one trading style is different than the one you use for another one. If you’re a scalper you will probably use small percentages in each trade (0.5% to 2%) since you are taking a great number of trades. A swing trader might use a larger percentage like 3% or 4%, it all really is determined by your trading style and Forex strategy you use for Trading. Due to this fact, learning more about your trading style will assist you to be effective as a trader and take better decisions.
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