Over trading

[Iconoclast1978]

Hello all.

I have a massive over trading problem. It is the last battle I need to conquer to become consistently profitable. My currently predicament is I break even nearly every month. I have a couple of other regular incomes that just about keep my bills paid so this is not the end of the world but it is obviously frustrating to say the least. It is also a waste of time. I spend far too long at t a computer instead of living my life.

My average week goes like this and it is consistent. I generally have a good ish day a bad ish day and 3 days where I make amazing percentage increases only to lose the lot by the end of the day. I regularly build 5-30% sometimes even 50-60% on my positions on a given day and all of that profit is gone by 7pm.

The upshot is I can trade, I am even humbly speaking, quite good at it. I have developed discipline in controlling my impulsivity, my revenge trading, and the big one; closing losses before they grow too large or not adjusting SL's. I cannot conquer over trading though.

Clearly I am a dopamine addict. I know this. I have conquered addictions in the past, smoking, over exercising, and abusing cannabis so I know I can beat strong decades old habits but this one is hard.

For me the reason overtrading kills me is because I can only win trades when I force myself to only trade when I get a real feel for the likely mid term behaviour or price. To get that feel I cannot spent too long looking at screens and charts. I cannot be too tired. I have to be well rested and fresh. The problem is I win 2 or 3 trades in a day and lose insight into myself. I become unaware of my creeping mental fatigue. I think I can win and win and win and I can't.

So how to leave the trade running and walk away. Then maybe analyse again and rinse and repeat a maximum of 1 - 3 times per day without losing insight and it's 8pm and I've had 20 coffees and been sat all day at a computer screen??

A couple of ideas I have had is spending time with my kids which is an obvious one or walking the hound but also, let's say I'm £300 up on that day. I thought maybe I just force myself to stop. Withdrawer £250 of that £300 and spend an hour or 2 deciding how much goes into an index fund, how much goes in the bank, what birthday present should I buy with it etc.

I am all ears...

Many thanks advance

 

[timsk]

. . . I am all ears...

Many thanks advance

Hi Icon',
There's a lot going on there!

You don't say which market(s) you trade, but one way to not be sat in front of a screen all day is to only trade market(s) that are open and offer the best opportunities at certain times of day. For example, if you trade indices, stick to the FTSE and/or DAX in the morning and spend the afternoon doing something else. Or, if you want to reverse that, play with your kids in the morning and trade the U.S. indices from 2.30pm in the afternoon (assuming you're in the U.K.).

The main thing you need to do is to have a a detailed trading plan - which you clearly don't have at the moment. This is the key to prevent you from over trading - assuming you have the necessary discipline to stick to the plan! It will also address the issue of giving back substantial profits, as it sounds as if you don't have a well defined exit strategy.
Tim.

 

[Iconoclast1978]

Hi Icon',
There's a lot going on there!

You don't say which market(s) you trade, but one way to not be sat in front of a screen all day is to only trade market(s) that are open and offer the best opportunities at certain times of day. For example, if you trade indices, stick to the FTSE and/or DAX in the morning and spend the afternoon doing something else. Or, if you want to reverse that, play with your kids in the morning and trade the U.S. indices from 2.30pm in the afternoon (assuming you're in the U.K.).

The main thing you need to do is to have a a detailed trading plan - which you clearly don't have at the moment. This is the key to prevent you from over trading - assuming you have the necessary discipline to stick to the plan! It will also address the issue of giving back substantial profits, as it sounds as if you don't have a well defined exit strategy.
Tim.

Hi Tim,

I trade US natural gas,, US tech100 and sometimes the FTSE100. The occasional currency pair if one of my alerts is triggered.

I generally day trade but sometimes leave them to swing.

I was thinking along those line. Maybe trading only at 2-4pm and 6-7pm. Allowing myself x2 trades in each of those time periods so max 4 trades per day. 3 hours in the zone and 2 more hours assessment. Total 5 hours.

Easier said than done...

 

[timsk]

. . . I was thinking along those line. Maybe trading only at 2-4pm and 6-7pm. Allowing myself x2 trades in each of those time periods so max 4 trades per day. 3 hours in the zone and 2 more hours assessment. Total 5 hours.

Easier said than done...

Commodities, indices and forex are three distinct markets. I suggest you get shot of at least one of them - if not two. Focus on one market (two at most) that offers the best opportunities and 'gels' with the way you trade.

Limiting yourself to X number of trades won't work if there are more than that number of setups that present themselves on average each day. If you're down on the day and another setup materialises, the little voice in your head will tell you this is 'the one' that will enable you to get back to break even on the day and maybe even into profit. If you take it, you'll lose more and be where you are now, i.e. over trading and giving back your profits. If you stay strong, stick to your limit and pass it up, you'll check back later to see how it would have panned out and, sure as eggs are eggs, it would have been a runaway winner and you'll be kicking yourself for not taking it. I'll put money on that! So, what to do? A far, far better approach - in my opinion - is to take every valid setup that presents itself - i.e. as specified in your yet to be written trading plan (hint, hint!) - and then stop trading at a predetermined time (e.g. the U.S. lunchtime if trading U.S. indices) or when your max daily loss is hit or, hopefully, your daily profit target is hit. The former prevents losses mounting up on days when it's just not happening for you and the latter ensures you quit while you're ahead and your equity curve carries on upwards.

If your setup is such that numerous opportunities present themselves - then this will lead to your current problem of over trading. The solution - as I've suggested already - is to limit the number of markets and then the number of instruments within that market. If there are still too many, then you need to refine your setup such that you only pull the trigger on the very best high probability trades. Less is more. ;-)
Tim.

 

[Iconoclast1978]

You are absolutely right and I get where you're coming from.

I like what you're saying about refining my setup. I have numerous systems and triggers that I use. I will devise an approach that reduces my ability to pull the trigger unless numerous confluences are presented.

I have to get up early anyway around 5am in the week so I am going to literally limit myself to 3 trades max per day. 5-7am 2 -4pm and 5-7pm. 1:1 to 1:10 risk to reward per trade depending on trade type.

I will paper trade this next week or 2 as an act of discipline and journal the time. Then I'll switch up to real money once I've established my exact rules during the trial period.

It's a simple matter of if I don't develop this discipline then I may as well accept the fact that will never truly make good money trading. History will continue to repeat itself and to expect a different result is literally insane.

I'll use Trello to journal my thinking and record my charts but I need to find a good spreadsheet layout that will record the financials, profit loss, account balance etc etc. I'm going to completely start from scratch and deposit 1k and track what happens to that 1k over the next 6 months.

I simply must change my ways or I may as well give up.

 

[Iconoclast1978]

Regarding limiting myself to set trades wont work; the point is that I need to make it work as a matter of discipline because if I cannot develop that discipline then I cannot succeed.

If that one rule is unbreakable in my mind and I do not break it then I am very likely to succeed. If I can't follow one single rule, then I will never succeed. Do you get were I'm coming from? This really is the one. The only unbreakable and absolutely essential rule. The rest are just guidelines.

 

[timsk]

Regarding limiting myself to set trades wont work; the point is that I need to make it work as a matter of discipline because if I cannot develop that discipline then I cannot succeed.

If that one rule is unbreakable in my mind and I do not break it then I am very likely to succeed. If I can't follow one single rule, then I will never succeed. Do you get were I'm coming from? This really is the one. The only unbreakable and absolutely essential rule. The rest are just guidelines.

Hi Icon',
Let me see if I've understood you correctly . . .
You're planning to trade three different daily sessions, each over a two hour period, starting at 5.00am and ending at 7.00pm, consisting (I'm guessing) of at least two markets? Furthermore, throughout the total six hour period, you're limiting yourself to a maximum of three trades - is that right? If so, I fear you're setting yourself up for failure, as your goal strikes me as being impossibly difficult!

Where does spending time with your family fit into this schedule? If you can just switch off from the (forex?) market at 7.00am, make the kids' breakfast and take them to school and do other stuff throughout the morning - and then switch back on at 2.00pm ready to trade the S&P when it opens - then you're a very remarkable person. I've been on this forum for circa 20 years and I've never heard of anyone attempting to blend trading with work/home life in this way! Still, if you think you can make it work - good for you - just ignore ol' sceptics like me.

As for sticking to your 3 trade limit, unless you have specific, workable protocols in place, then this will remain a wish, an ideal - one which you will almost certainly fail to stick to. What if you take your max' three trades in the first session and they're all profitable - will you not bother to look at the markets in the afternoon sessions? My guess is that the little voice inside your head will tell you you're on fire today - you can do no wrong and that there are more profits to be had in the afternoon. Conversely, imagine if you don't make any trades in the first two sessions and the family are pestering you to spend time with them and your partner is nagging you to tidy up and help prepare the evening meal - or whatever The pressure on you to make the third session really count will be huge - otherwise that little voice in your head will tell you you've wasted the entire day and your family are pi$$ed off with you. Needless to say, if you do take the trade - it'll be a loser - guaranteed. As I said in my last post, if you stick to your plan you'll regret it and it you don't stick to it you'll regret it. So, psychologically, it's a lose : lose proposition. But hey, this is just my £0.02p worth - if you can make it work for you - good luck to you!
Tim.

 

[Iconoclast1978]

You are right, it's a crap idea. I'll slip right back into my old ways within days at the most.

3pm till 7pm. 3 trades max. 1:1 to 1:10 risk to reward. 1 hour screen time max either side then switch off.

At least I'll be able to journal this. 20 scalps in a day is impossible to record. I will probably occasionally take 80% on wins, zero stop loss and swing the rest so not sure how to record that. Perhaps a separate journal. Messes with my profit loss and balance records though hmmm

 

[BigDeal]

Hi @Iconoclast1978

A lot of what @timsk says is something which I have adapted to over the last few years, and I agree with. I don't know whether this will help you directly, but I've had issues in the past, partly with overtrading, but certainly with spending too much time at the screen simply watching the markets.

I consider myself a day trader, currently trade US indices only, and only during market hours. My bets (yes I use that word deliberately) are placed at 14:30 (or just after) most days, and I will look at my positions very infrequently during the rest of the day, in fact usually once somewhere near the close at 21:00 to decide what to do.

I've tried the 'I can trade for a living route' but it was too stressful for me. I now treat my trading as an enjoyable hobby; I allocate a certain amount of capital (and time) to it, as one does with most hobbies. If I lose, well hay ho, thats the way it is. However if I win I take my profits out at the end of the month and spend it on something nice. I don't make an awful lot, but I generally make a profit on a monthly basis.

 

[rkotrading]

This is what worked for me:

I sit in front of the chart at 2:45 uk time and close the computer after I close the first trade.

I’m a scalper, so I trade max 1h per day. 1 trade per day. No matter if that’s a loss.

It took a few months to build the discipline but it was worth it

 

[ThaddeusFinch]

Overtrading can eat up your money by making you pay more fees, and often leads to bad choices that don't make much money. Also, trading too much can make you lose more money than expected because it's riskier. I remember the time I overtraded, which eventually led to huge losses for me, and I tried to prevent it.