How To Free From Overtrade

There are so many scenarios that can be referred to as overtrading (too many open positions, too much use of capital funds, too many trades in a short time, trading beyond risk limits, and so on). In essence, overtrading is trading without a good strategy and management so that the trading business that is carried out tends to be like playing gambling. There are 3 ways to be free from overtrade, namely:

1. Set Number of Transactions (In a Period)

Many traders have a habit of doing as many open positions as possible with the assumption that this habit will generate more profit. Most traders use the habit of 2-4 times as a reasonable and feasible amount to open a position. The main thing is to think about the quality of the trading signals that you will use to open positions, and not take advantage of as many trading signals that appear in a day.

2. Apply Risk or Reward Ratio

When the trader has planned to open a position 3 times. The trader has already run to open a position 3 times. The trader has run 2 open positions and made a profit of $10 for each position. So the total trader earns $20. Because the trader's trading plan has described 3 times open positions, the trader immediately looks for another opportunity in another signal. Feeling dissatisfied with the profits obtained will usually provoke a sense of desire to open positions again and again. In order to avoid such an overtrade trap, it is best to apply a risk/reward ratio with a ratio above 1:1.

3. Prepare an Exit Plan from Bad Market Conditions

It is impossible to determine the direction of the market movement. There are times, a trader's day really falls short of what he had planned. So that almost all trader positions are in a loss condition.

4. Don't be easily tempted to open position

Should not be tempted to open positions again because it will only lead to overtrade. When market conditions are difficult to predict, temporarily avoiding the market is the safest and wisest move that has proven its effectiveness. The keyword to be achieved is consistent profit. It is not as difficult as one might think, for most traders. traders need to establish strong discipline in following the trading plan, so that overtrade conditions that will lead traders to profit inconsistencies can be avoided.

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