Trade The Journey

Trade The Journey

Trading Lesson: Overtrading

With my trading size growing and consistent profits coming in, I’ve decided to pen down the weekly insights I gather from the markets. These reflections will be succinct but rich with the valuable lessons I’ve absorbed through active trading.

The first lesson is to avoid overtrading.

There’s a certain satisfaction in seeing a strategy succeed, whether in daily life or on the trading floor. My profits have been on the ascent, yet so too have my losses. Thankfully, the wins have been outpacing the setbacks. It’s a preferable dilemma to have, though returning gains to the market feels akin to repetitively purchasing a costly item, briefly enjoying it, and then returning it for mere partial store credit.

Typically, I exit a profitable position and shut down the app, only to reopen it moments later to bask in the gains I’ve made. This often leads to questioning my decision to exit early. I’m torn between the joy of a win and the nagging thought that I could score yet another sizeable gain.

Rather than channeling these thoughts into refining my strategy for the next week, I sometimes find myself launching into another trade or even multiple trades simultaneously. Initially, these may perform well, but too often, like a predictable plot twist in a lackluster film, they begin to falter, and I find myself scrambling to manage an unplanned situation.

At the start of the week, my blog post crafting aids in forming a market perspective. Observing the market’s opening behavior, I build my trading approach on live data. Before entering my first trade of the week, I set aside any overconfidence, embracing a measure of apprehension. This caution breeds objectivity, an elusive yet crucial trait for any trader.

However, when initiating subsequent trades post a win, my approach is less measured. I might enter the market impulsively, sometimes riding an ephemeral high that too often leads to a trade unwinding into a loss. This lack of objectivity, fueled by the overconfidence from previous wins, is a trader’s snare.

Overconfidence can blur market perception and erode preparation.

My preference is to retain my earnings rather than surrendering a share back to the market. To this end, I could avoid market monitoring post-trade or maintain my position size modest, leveraging only a slender slice of my profits.

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