Over-Trading in Forex and How to Stop Yourself

Over-trading is a trap that new forex traders can easily fall into. At Vantage FX, we see this mistake repeated time after time when new traders speak to us about their progress and it has inspired us to write this blog featuring some simple steps on how you can stop yourself.

As Vantage FX are an ECN forex broker and not a market maker, both our own interests, as well as the interests of our clients are aligned. Put simply, Vantage FX wants you to make money! So if you’re finding over-trading to be a problem, then give this blog post a read and try to make some of the suggested changes to your forex trading routine.

What is Over-Trading in Forex?

When you read this, you have to be honest with yourself. If you don’t identify that you have a problem within your forex trading, then you won’t be able to make the changes necessary to fix it.

Placing too many trades in a short period of time

When you are entering and exiting the market a large number of times, the tendency is that you then take lower quality setups. It is a sign of impatience and means that you have failed to stick to your trading plan as you were meant to trade it.

Trades so often make the excuse that they thought it was a quality setup at the time, but this is just a symptom of poor planning. You have to know your trading strategy inside out to be able to seamlessly execute only the highest quality forex trading setups.

Forex trading with bigger size than your account should justify

Picking the highest quality forex trades is one thing, but executing them with the correct trade size is a whole other kettle of fish. Risk management is key to the long term success in the forex trading business and position size is a huge part of this.

No matter how tempted you are by a particular setup, if you’re taking a position with a lot size larger than your account can justify, then you’re over-trading. Your strategy should have a clearly back-tested size restrictions on your positions that it is imperative you stick to.

Strategies to Stop Yourself from Over-Trading in Forex

If what we’ve described above sounds dangerously like you and your own forex trading, then there are some strategies that you can implement immediately. Coming to the realisation that you’re not as disciplined as you should be is a huge first step to take, but now you’ve actually got to be able to do something about it.

Plan your trade and then trade your plan

This is an old clich√©, but it is something that should echo through your mind each and every time you go to hit that order button in MT4. It simply refers to having a forex trading plan and then executing it. Don’t deviate from your trading plan. Ever. Just don’t do it!

Implement a self checking process for every entry that you take. Ask yourself is it meeting the criteria set out by your trading plan and if it does, are you trading it with the correct volume for your current account size. Only when you have made sure everything here is correct should you then enter the trade.

Keep it simple stupid

You’ve surely heard of the KISS principle. When it comes to successful forex trading, the best traders truly do KEEP IT SIMPLE STUPID. No, this isn’t an excuse to not put the work in. But when it comes to trying to preventing over trading, you need to shift your workload to focus on the planning rather than the trading itself.

If you’ve done the work before hand then you don’t need to be sitting in front of your charts 24 hours a day and analysing every single tick up or down on the 1 minute MT4 chart. Keep it simple by entering a clearly planned trade and then stepping away instead of micro managing your position.

Source: Vantage FX Blog