Overtrading is the practice of excessively getting into trading positions on currency pairs, stocks, or other assets. It involves trading all day without a break. This leads to making poor trading decisions that end up wasting your money.

This is solely a psychological problem. While trading, traders must control their feelings and emotions in order to succeed. Trading excessively, or overtrading, is more likely to happen when a trader doesn’t have a clear idea of what he or she hopes to accomplish in the market and does not set time limits for when they are on the market.

Overtrading may be identified by a number of factors

Individual traders, whether self-employed or trading with a prop firm, will have limits concerning how much risk they may accept (including how many trades are appropriate for them to make). Continuing to trade after they’ve hit this limit is a risky move, and reflects overtrading. While such activity may be detrimental to the trader or the company, it is unregulated by third parties.

Individual traders often overtrade after a large loss or a series of lesser losses throughout a prolonged losing streak. They may strive harder to make up gains wherever they can, generally by raising the size and frequency of their transactions, to recover their cash or seek “revenge” on the market following a spate of lost trades, this also reflects overtrading.

What are the reasons behind overtrading?

1) There are no precise guidelines

Without a trading strategy in place that specifies entry and exit criteria, as well as money management restrictions, you’ll be left with a pure discretionary strategy that is driven only by your mood when it comes to following the markets. On days when you’re pumped up about the market, you might find yourself overtrading.


2) Fear of missing out ‘FOMO’

An investor or trader’s fear of missing out on an investment or trading opportunity is referred to as FOMO. The fear of missing out is heightened when an asset’s value rises rapidly in a short time. A person (or the market as a whole) is more likely to make market judgments based on emotion (fear of losing out) than logic and reasoning. An investor who follows this strategy carelessly has the danger of making several transactions on assets with excessively high valuations, which puts him or her at even higher risk of losing all of the money they invested.

3) Greed

Either you’re beginner who just found out you can make money in the forex markets anytime and anywhere. Or you are someone who just began working for a forex prop business as a day trader, and on top of that, a large amount of your profits are yours to keep? Congratulations! However, if you want to earn more money, you may grow greedy and increase your overtrading in order to do so.

4) Trades of revenge

In the aftermath of a large loss, revenge trading is a natural response. After a large loss, traders might immediately place another trade without considering their next move or re-evaluating their approach. Recovering swiftly after a setback is the ultimate objective. It is based on the idea that the losses may be quickly recouped by making a second trade (which is also projected to win). In the end, the forecasted winning revenge trade would probably lose money. However, there is just one larger loss that the trader is now seeking to recover.


How to stop overtrading?

Write down your trading strategy

The most important piece of advice you can take away is to be proactive, not reactive. Writing out a detailed, measurable strategy can assist you avoid overtrading. A set of rules and criteria for price movement, which you follow when they are met, should guide your trading decisions. Trades are not necessary if your requirements are not met.

Create a watch list

When it comes to trading indices, currencies, crypto, or everything in between, there are many options available. If you’re using multi-timeframe analysis as well, you’ll be confronted with an unlimited number of charts and candlesticks to follow. Overtrading will increase as a consequence of this. As an alternative, place a few things on your watch list and apply your trading strategy whenever the conditions are right. This will help you keep track of your trades and prevent overtrading.

Do not create a daily goal for yourself

Having a predetermined daily profit objective is a major factor in overtrading (for example, 2%). Your trades could not go according to plan if the markets don’t cooperate with your expectations. You should stay away from trading at this time. At least until the markets return to normal, even if it means not trading for a few days. With a daily profit objective in mind, you’ll be more likely to take low- probability trades and risk a loss, a practice that leads to overtrading.


Set your trading schedule

If markets are not open 24 hours a day, you shouldn’t be either. A person’s ability to make well-informed judgments may be harmed if they sit in front of a screen for more than eight hours a day. One of the hallmarks of overtrading, in the opinion of many traders, is the belief that you must trade continuously throughout the day in order to be successful. Decide on one time each day when you can do the same thing again and over. And based on the items on your watch list, you may be able to benefit from unique volatility patterns. It doesn’t matter what time your trading hours are; once they’re ended, you should stop.


Overtrading is when you engage in any transaction that is outside of your trading strategy or puts you at danger of going over your risk tolerance limitations. When it comes to overtrading, neither the time frame in which you trade nor the amount of deals you make are relevant considerations.

It’s critical that you stick to the parameters of your trading strategy (and nothing more). As a result, you must also consider your tolerance for risk while deciding whether or not to trade.