48 months of trading has surfaced one big realization:

This journey has a lot of hidden traps.

Overtrading has plagued us all, one way or another. In this post, I’m going to explain how I stopped overtrading - something that can completely change your trading career.

It’s probably pretty obvious, but overtrading leads to unnecessary risks and losses, destroying your accounts and your confidence. I think if more people can figure out a simple approach to avoiding this issue, more traders will find the success they’re looking for. Profitable trading is about consistent returns and good risk management. It’s my hope that this quick guide will provide a simple framework that can yield results for you.

Unfortunately many traders tend to self-sabotage. Overtrading is just another version of self-sabotage. I can slap you in the face with the step by step guide to profitability, but at the end of the day - it’s all up to you.

First, Let’s Define It.

When you think of overtrading, there’s a good chance you’re thinking something along the lines of an excessively frequent execution of trades, right? This is a vague interpretation and it’s a bit subjective. I think this definition is more fitting of a gambler.

I believe it’s all relative to your edge. Assuming you’ve defined your edge, you would have a solid understanding of your expectancy around your setups. If your edge indicates there is an average of 20 setups per day, taking 20 trades in a day isn’t overtrading. Taking 23 is. On the other hand, if your edge states you can expect 4 setups per day, taking more than 5 or 6 would be considered overtrading. This applies to your trading window as well. If you trade outside of your clearly define 2 hour trading window, you can consider this overtrading.

Overtrading is relative to your framework, not an arbitrary number you heard somewhere. If you’re trading without a defined edge, you’re just gambling and none of this applies.

The Real Reason Traders Overtrade:

Traders often let emotions, like greed and fear, override their trading plans. This emotional response can lead to rash decisions and deviation from a disciplined trading strategy. Here are some other reasons for overtrading.

• Lack of planning- overall and intraday

  • Many traders don’t have a plan for how they’ll approach their trading session, let alone a trading strategy that clearly outlines their edge.

• Too much chart time- studying/backtesting vs live trading

  • There’s a significant difference in required chart time while studying vs live trading. Live trading requires drastically reduced time in the markets.

• Self control

  • Some traders tend to ‘blackout’ while taking losses. After they snap out of it, they can’t believe they’ve just 8% in a single trading session.

• External Pressures

  • Max DD on a prop challenge, your friends/family wondering if you’re actually going to make trading work, you quit your job too early to go ‘all-in’.

• Boredom / Not feeling productive

  • This one is the worst. You spend all that time learning and blasting through PA on FXReplay but when it comes to the live markets, you have zero patience. You subconsciously think “If I don’t a trade today, I’m wasting time.” Wrong.

• You saw someone else share a trade

  • You’re in a community and someone's posting Trading View screenshots of the trade they’re “in”. So you FOMO in.

• Missing previous setups

  • Maybe you woke up late and missed the NY Open play. Maybe you analyze price outside of your session and see a setup you “would’ve taken” had you been awake… which you never would be because it’s 3am, so you think you need to be in the market.

These are all forms of self-sabotage at the end of the day. Speaking from experience, it can be hard to be completely accountable for yourself. This is where frameworks come in. I put frameworks in place to protect me from myself.

Here’s three easy steps that helped me put frameworks in place to keep me from hurting my trading.

Step 1: Develop a robust trading plan

Your trading plan is your roadmap. It should include specific criteria for entering and exiting trades, risk management rules, what to do in drawdown, etc.

A clear plan helps you trade systematically, reducing the likelihood of emotional or impulsive decisions. Before I completely hashed out my trading plan, I was really just guessing and gambling.

It’s important to understand that you should also make a daily trading plan, or outlook: something that tells you what to do for the day based on certain market factors.

• Is there news?

• What direction is the HTF headed?

• Can I trade a Pro Trend move? From where?

• If I’m going to trade Counter Trend, what do I need to see?

I apply this framework everyday, as do many of the traders I work with. This alone can address a lot of the issues stated above. Once you start to see price play out how you mapped it, your ability to trade confidently will grow.

Step 2: Get off the charts.

Out of sight, out of mind. Truer words could never be said.

So many traders fall victim to overtrading, over management, overanalyzing, second guessing and so on. All of these issues are solved by simply getting off your charts.

”But what if I miss a setup?” What if? What if you followed your intraday plan and only traded when you were supposed to? I bet you’d see better long term, consistent results.

Know where you’re trading TO and where you’re trading FROM. Set alerts and find something more constructive to do with your time.

Simply reducing your chart time will significantly increase your profitability.

Step 3: Review.

Just about every problem has a solutions. The problems that don’t, are generally the ones out of your control. The best part about trading problems, like overtrading, is you have the control.

By developing an intraday plan or outlook- it allows you to self-assess performance relative to that outlook.

“I said I was trading long from this H4 POI, but I tried to get short all day” - assess what happened. Do better tomorrow.

Keep in mind: in order to solve a problem, you need to be able to clearly define the problem. The only real way to do this is so articulate your plan, execute and review.

Define your edge, reduce your chart time, trade within your framework.

That's all for today! Have a good one.