U.S. stock meltdown on Monday, with the Dow Jones largest decline in more than a month, as concerns about the financial sector continues to haunt investors.

The Dow Jones Industrial Average fell 241.81 points, or 2.1%, to 11,386.25 with all of the Dow’s 30 components finished in the red.

The S&P 500 Index was down 25.36 points, or 2%, to 1,266.84. The Nasdaq Composite Index declined 48.75 points, or 2%, to 2,365.96.

American International Group Inc. down 5.5% after Credit Suisse analysts lowered their third-quarter profit estimate and target price on the insurance giant.

A quick reaction on bearish reversal made on some put purchases on some of stocks that I have been tracking. They have managed to bring in some very good profits yesterday, a total of $600.20 profit in just one day.

The market may remain to be overall bearish for the whole week so I have decided to let it run for the week looking forward to collect more profit when it drop further. On the safe side, all my trades are set a conditional market order as my stop, should any of them decides to move up against my position.

“The time is always right to do the right thing” - Martin Luther King, Jr.

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Overtrading is a common problem faced by many traders who are unable to bring in consistence profits. It can mean different things to different trader; overtrading can be trading too many markets or sectors, using too many financial instruments or simply placing too many trades in just one market.

Many times, a trader overall loses money is not because of his inability to spot potential trades but rather too many choices or opportunities that are tempting to trade.

It is the inability to limit down to only the really good one rather then the “perceived opportunity trades” that makes a trader overtrades because he might just trade them all. The profits from the good trades will eventually be absorbed and drained off by the bad ones. You have to learn how to manage and select your opportunities well.

Overtrading reflects on the trader’s impatience to wait for the opportunity’s confirmation and usually makes a prediction prior to it. He usually feels frustrated or disappointed over the decision made when he is wrong and become emotional which could led to even more heavier losses.

To make money, you only need to be good in one market or one financial instrument, that’s enough. You only need one knife to kill, just sharpen it. Having too many options can slow you down on your learning curve.

To overcome the problem of overtrading, you are required to develop a system to qualify your “opportunities” and the discipline to limit that trading opportunities to just picking one or two trades in order to maximize your trading effectiveness so that the profits that you gain from the real good trades will not be offset by the losses in your other “mistake” trades.

Have a written trading plan and follow it religiously, never compromise and develop the patience. It is a behavior pattern, just change it and you are on your way to become a better trader.

“The investor’s chief problem and even his worst enemy is likely to be himself” - Benjamin Graham

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U.S. stocks rallied on Friday, but still down for the week, with sentiment boosted by falling crude oil prices and talks about Lehman Brothers may be acquired, while a speech by Ben Bernanke saying that inflation was on track to moderate in the coming months, triggering a rally in stocks on speculation the Fed will keep interest rates low for now.

The Dow Jones Industrial Average shot up 197 points, or 1.7%, to end at 11,628, but still posted a 0.3% weekly drop after being battered earlier this week on worries about the fate of mortgage giants Fannie Mae and Freddie Mac. The S&P 500 Index was up 14 points, or 1.1%, to 1,292 with a weekly loss of 0.5% while the Nasdaq Composite rose 34 points to end at 2,414 with a 1.5% loss for the week.

The CBOE Volatility Index (the VIX) a measure of fear in the market, was down by 1.01 point or 5.1% to end at 18.81. However, VIX futures are trading much higher, indicating that volatility traders expect are expecting higher volatility in September.

The VIX has been down for the past 6 weeks is now near the lowest levels since early June with support levels at 18.00 and 16.00 any increase in the VIX in the following weeks ahead could mean an increase in the market fears which will drive stocks back down lower as there are so much uncertainties particularly the ailing financials and high crude prices.

“The financial markets generally are unpredictable. So that one has to have different scenarios.. The idea that you can actually predict what’s going to happen contradicts my way of looking at the market” - George Soros

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