Overtrading – Why Do We Over Trade?
Why Do We Overtrade?
As a binary options trader, you are also an entrepreneur. That means that you spend a lot of time hunting for opportunity. Binary options trading is itself a great opportunity, a chance to become self-reliant and make a living online. Within the field of trading, there are numerous other opportunities—make the right networking connection, test the right system, take the right trade, and live can change for the better.
I would like to take a short post though to remind traders that balance is important in trading, as in life. Keeping your eyes open for opportunity is important, and so is actively seeking it out—some of the time. Other times, though, we need to learn to curb our entrepreneurial impulses. Why? Because sometimes the best opportunities are the ones that come to us, and nowhere is that more true than when you are waiting to take a trade.
Does the following scenario sound familiar?
It’s been a week and you haven’t taken a trade. Looking over your stats for the past couple of months, you are feeling frustrated. If you do not take more trades, you will never get anywhere. Clearly you are not doing enough. Desperately, you start researching a new binary option broker, you start hunting through the charts, looking at dozens of asserts until finally you find a few setups that look like they might be acceptable.
You take them. You lose.
Now you are further behind than ever.
If this has ever happened to you, you know the dangers of overtrading.
What Is Over Trading? Trading Too Much
Overtrading happens anytime you invest more than you ought to. It may mean you are taking too many trades simultaneously, and you cannot manage them all, or you are simply taking bad setups, as in the situation above. Overtrading is an extremely common pitfall. You feel productive when you are doing it, and then wonder why you are losing more and more money.
What causes overtrading? There can be a lot of factors that feed into this trading behavior, but impatience is probably the most common one. I think it is also common for trading coaches and bloggers to chalk this up to a lack of discipline. While that is certainly a factor, I would actually guess that for a lot of traders, the problem goes deeper than that. It may not be a negative trait that is causing your impatience, but simply a positive one that is out of balance—that entrepreneurial spirit. In essence, being too disciplined to always be doing something—whether or not it is helpful.
Missing Trading Opportunities
The entrepreneurial mindset is dominated by one key conviction, and that is this:
There is nothing worse than missing an opportunity.
The tricky part is when you cannot tell an opportunity from a distraction. Overtrading can distract you from that feeling that you are sitting on your hands doing nothing. But it does not represent a genuine opportunity. It just feels better than “doing nothing.”
The truth you need to remind yourself is that waiting for the best setups is not “doing nothing.” You may feel like you are being passive staring at your computer screen, but you are not. And there is plenty you can do while you are waiting if you need to distract yourself, like read a book on trading, chat on a community about trade setups, or test a new trading method or improvement on your existing method.
That last recommendation may be the best way to cope with entrepreneurial impatience. You want to trade more? Instead of hunting desperately for sub-par setups, why not instead work on testing changes to your trading method which allow you to trade more assets, more timeframes, or even different types of setups? That is the best way to hunt down opportunity. This allows more trade setups to find their way to you. And you will no longer feel like you are “just waiting” or “doing nothing,” which will hopefully also help to mitigate your impatience and prevent you from going on tilt.
The best setups are A+ setups. You will recognize them on sight because they will stand out to you from your extensive testing experiences. You do not have to go hunting them down, and anytime you find yourself searching for reasons to trade, you are overtrading. Turn that entrepreneurial spirit back to your advantage by expanding your knowledge of trading and coming up with more winning techniques. This will automatically boost the actual trade setup opportunities available to you, and you will not have to go hunting.