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!
When you read this, you have to be honest with yourself. 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.
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. Your strategy should have a clearly back-tested size restrictions on your positions that it is imperative you stick to.
It simply refers to having a forex trading plan and then executing 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.
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. Keep it simple by entering a clearly planned trade and then stepping away instead of micro managing your position.
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