Over Trading
By Jay Norris�
This article is a reprint from August of 2008
I was talking to a client today, and he asked what I was up to and I told him I was in a day-trade in gold.
He asked if I traded gold much and I told him no, not in awhile, so I was starting out small. I told him how in a forex account we can trade as little as 10 ounces at a time. My trade was 30 ounces.
He thought that strange that some one with my experience would trade so small. I knew right away that his perception that I should be trading larger size was at the heart of the problem of why people over-trade.
The truth is, I told him, if I had been away from trading that market for many months, I should have been starting back in a demo account. It’s well known among experienced traders that the worst time to trade, let along trade size, is after a vacation, or after you’ve been out of a market for awhile.
My point is smart traders know to ease back in because their primary concern is risk, that is not losing money. I don’t know how heavily gold is trading these days. I don’t know how smooth it runs or how choppy it reacts. What I do know is by trading small to start I’m limiting how much of my money I can lose to professional gold traders. Realistically I should be demo trading it until I’ve got a dozen or so trades under my belt.
I really can’t speak much on why people over-trade, especially their own money. It just makes no sense to me. But I do know it is a problem for many a retail trader. The only solution to that problem I can think of is one that’s already in place for most of us, and that is limit the risk per trade to somewhere between 2 to 3% of your account, and never break that rule.
Jay Norris is the author of Mastering the Currency Market, McGraw-Hill, 2009 and a Trading Instructor at Trading-U.com. To see our course selection go to: Intermediate Level Trading Course
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments.
yes it is not good to over trade in forex trding.
you can use resistance and support break out for your day trade for currency trade.
Yes, very smart to trade Demo or 1 lot in a market you just dont know. That is smart trading….protect what you have or the pro’s in your “new” market will eat ya for breakfast…..
Thankyou