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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