2 Strategies to prevent Over Trading

Over–trading is almost certainly the most predominant trading mistake that Forex Traders make. In this article I will show you how it is your emotions that are leading you to Over Trade, and how you can overcome this with two relatively easy strategies.

You may not even realise that you are over trading, in which case you probably are. And it is that which is causing your lack of success.

Over trading has several ways of presenting itself, all of which are destructive to your trading. It is by understanding that over trading is driven by your emotions that will enable you to surpass this obstacle once and for all. Let us first establish the emotions and how they cause you to over trade as a Forex Trader…


Can cause you to open too many positions. You see a signal for your system and pull the trigger not pausing to realise you are in trades up to your neck already this is over trading. Going looking for trades on other time frames to the one you usually trade, because you don’t have a signal, or a trade running is over trading. Having too many correlated trades is over Trading again this is usually caused by greed, but could also be cause by…


Fear of missing out of a move can also lead to over trading. You see a perfect signal on your favourite pair let’s say EURUSD as an example, but you are already in two USD trades or two EUR trades, but you still take the trade. When your rules clearly state that you cannot have any more than two trades running per currency pair. Taking a sell close to Support or a buy near Resistance, that is over trading. And that is often caused by the fear of missing out on a move.



Can get you into a trade you shouldn’t be in. When you get stopped out before the market goes your way and you jump in without proper trade management that is over trading brought about by your revenge emotion.

Or the market starts moving in your direction before it hit your support/resistance level, so you jump in, even though it’s not your signal or setup. Usually because you feel slighted by the market, this is a form of Anger that quite often leads to a revenge trade.

“How dare the market move without giving me a signal, I’ll teach it, I’ll jump in now and make some money.”



You see another Trader having great results and they start to post their trades. You take those trades without any idea of the rules, without any back testing of your own. Purely because of your jealousy of their results. This is overtrading. You are placing trades over and above your trading rules.


Over Trading

Over trading is quite simply like you’re throwing spaghetti at the wall and just hoping most of it sticks. This formula for trading is a fool’s errand and will always end in pain and misfortune.

Whereas successful traders are more cautious with their money, they wait for the best opportunities and limit their exposure. The trades you don’t take are equally as important as the ones you do. So how do they control their emotions so that they can achieve that.


And the best ways to Stop Over Trading

Two strategies equally as important as each other. Both a definite requirement for Successful Trading at any level… A Trading Plan and A Trading Journal. They really do have a multitude of uses. Which is why they are so important.

I don’t know about your experience I can only give you mine. Trading Plans and Journals were always mentioned but never really explained that well in terms of relevance and importance.

Well they are both designed to help you control your emotions, all your emotions. Both Positive Emotions and Negative Emotions. It really is that straight forward. Trading your own or other people’s money is emotional and until you learn to control those emotions you need help. That’s exactly what your trading plan and trading journal is. It’s your help while you learn to control your emotions.

Trying to make an educated and logical decision when in an emotional situation just does not work. The whole way our brain is set up to function under stress is the complete opposite of what we need as a trader and as a 21st century human being. Any sort of stress (which is caused by fear, greed, revenge) is deemed by our amygdala to be a threat and unless you have mastered emotional control you will be on the end of an Amygdala Hijacking.

The amygdala automatically puts the body into fight, flight or freeze mode before you can make a logical decision. This will be discussed further in a future Blog. The main principle being You Do Not want to be making Decisions while in the market. Hence the need To Trade your Plan and Journal your Trades.


The Journal

Some of you at the beginning may have been unsure as to whether or not you were over-trading. I would suggest that this is because you don’t have a trading journal. If you had a trading journal and you regularly review it. You would see the mistakes that you repeatedly make, which more often than not is over trading.

You should journal every trade, not just your losses as some traders do. Why? Because what are you going to review at the end of the month. Losses by themselves tell you nothing (also please remember the Law of Attraction, if you only review losses every month what are you installing into your subconscious?) you need all your trades. Winners, losers and non-starters if you place pending’s. Remember your looking for patterns.

When reviewing your journal on a monthly basis or more often if you are a scalper. Or even less often if you are trading the weekly charts. You may spot that you always over trade by taking too many correlated currencies.

After testing you see that if you had taken only the two best trades every month you could save yourself 1R every month. If your 1R is 1% that is 12% a year. That could be the difference between you being a successful trader or not.

If you trade using a checklist that requires a signal to give you a score of 5 or more out of a possible 10. You may notice you get one 10 a month that is almost always a winner (9/10) you could make this a 2% trade rather than just 1%. But how will you know this if you don’t journal.

It could also be when using that same checklist, you find several trades that score a 6 with the same 6 checks but they always lose. We now know that taking those trades is over trading with a definite loss. How much could this save you? How will you ever know if you don’t journal all your trades…

Book cover "Trading Journal"


The Plan

The Trading Plan is essential to stop you over trading. This is done by making all the decisions before entering the market. Thus, taking away any emotional decisions. Your Trading Plan should tell you specifically how many trades you can have open of any one currency. It should also include the maximum number of trades you can have open at any one time, regardless of how good the signal is.

The whole point of the Trading Plan is to stop you getting an emotional High Jacking. When you see another trader having a good run of form, you congratulate them. You celebrate with them. But you do not take their trades. You only take the trades your rules allow. Because you have tested them, and you know that if you follow your rules you will get the results you require.

Which of course does mean then that you must test all of your rules. This will mean back testing and future testing… another Blog or two I must write. The only way you will have the confidence in your Trading Plan will be if you have tested it and double checked your findings. Then and only then will you be able to trade it anywhere near mistake free.

And that my friends is the number one goal of successful traders. Not to be right most of the time, but to trade mistake free or as near to as possible. That is why a lot of traders look to automation, they try and take the human error out of trading. Even those guys still have a trading plan. Otherwise they would allow their emotions to get in the way of their trading bot.

If any of you are thinking of trying to use Automation to get a handle on your emotions. It doesn’t work, it does lessen it to a certain degree over manual trading but not by much. You still need a Plan and a Journal when you start in order to keep those emotions in check.

Book cover "Trading Plan"



Get a Trading Plan and Trading Journal and start today, this will all help you towards getting a Traders Mindset. If you don’t know how to or if you are not sure where to start. Visit us at Special FX Academy, we are here to help. Or check out this blog it’s the easiest way to start your trading plan My Big SMART Goal and how it’s made me Successful in Life and Trading. In order to plan you must have a destination in mind, that Blog will get you on the right track.
What are you waiting for…


If you are struggling to learn to trade consistently by yourself, then I would suggest taking a look at our Trading Room. Here you will gain access to two coaches, Andres – Director of Trading and myself Director of Trading Psychology. Where else can you learn and be coached by a Trading coach and a Trading Psychology Coach, while making pips?


To Your Consistently Profitable Trading



P.S. What did you think of this Lesson? Please share it with us in the comments below!

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Callum McLean

Co-Founder and Trading Psychologist at Special FX Academy
Trading Psychology Coach and Certified NLP Coach. It is my belief that trading is 99% Psychological. And it is by understanding and improving your psychology, that you can be a successful trader. Success is a formula that everyone can and should learn.
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4 years ago

[…] of them stemming from your emotions and your lack of emotional control. You may be struggling with over-trading, meaning you are being controlled by fear, greed or any one of the other emotions. These daily […]