Colombian journalist and Forex's technical and fundamental analyst since 2010. His articles has been featured in several media outlets.

Overtrading: a common mistake in Forex trading

The Forex market is one of the most profitable businesses nowadays, and there's no doubt about it. In a market that moves trillions of dollars every day, you can find many opportunities to make money. However, to reach profitability at Forex, you need to establish a plan that will allow you to protect yourself against possible unexpected market movements. We have no doubt that opportunities will always be there, and for that reason we should not fall into the trap of "overtrading".

Overtrading is one of the major diseases that traders face, especially those, who are new and who are just taking their first steps or, better said, newbies. The Forex market is very volatile and because of it, there is a false belief  that you should trade every move in the market. The reality is that a professional trader must have an established strategy, in order to have a clearer vision of the market.

Many novice traders do not see the future clear enough to pursue it in this business, as these same people believe that the Forex market is all about gambling, where the "bet" on the rise or fall of one currency against another is the main thing. In thess cases the overtrading comes into the scene and those, who do this with their trading accounts, in the end have more losses than gains.

This Forex trader’s disease can cause a very large drawdown in trading accounts in a very short time, leading the trader to make bad decisions, for example, to risk more than 50% of the account on each trade to recover losses committed in a previous trade.

Overtrading is a common mistake and to avoid this, it is important that the professional trader works fine in the psychology part of this, because Forex trading is a business like any other, where you have to make decisions, risking a part of the initial capital and follow a pre-established plan.

Another factor influencing this is that the novice people in this business tend to get carried away by emotions, which is a very serious mistake, because this can trigger a domino effect: greed and trading 100% only by emotions, without technical or fundamental analysis will provoke not only a single loss, but a series of unsuccessful trades.

In Forex trading, you have to take losses when they occur. Traders also cannot allow themselves to regret the ungained profit and missed opportunities. Besides, there is no rule that says that every day we have to do trading in order to reach profitability.

As mentioned earlier, there will be always opportunities the Forex market and thanks to a good strategy and patience, traders can be successful without relying on luck, because Forex trading is not about being lucky: it is a matter of being smart.

And… a bonus track: if you’re having a very bad day in trading, take a rest before restarting your trades. As we have said, the opportunities will come! 

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