Home / Psychology / 6 Simple Tips To Help You Overcome Overtrading. Trade Less To Make More Money

6 Simple Tips To Help You Overcome Overtrading. Trade Less To Make More Money

Over-trading and micro-management (continuously fiddling around with your trades and orders) are among the main reasons why traders fail and very few understand why they are over-trading and even fewer know how they could stop this bad and expensive habit.

In this article we take a look at the most common problems many traders face, how they could eliminate a lot of the problems that come with over-trading and micro-management and how to become a better trader by trading less.


#1 The 80/20 rule applied to trading

The 80/20 rule says that 80% of your results come from 20% of your actions – this is a widely accepted principle in many areas of our daily lives and in business. Famous examples are: 80% of your sales come from 20% of your customers; 20% of your sales reps close 80% of the deals; 80% of the complaints come from 20% of your customers; 80% of wealth is owned by 20% of people, and so on…

In trading, the same applies and 80% of your results come from 20% of your actions. However, most traders don’t fully understand that the things they attribute the least importance to will actually make the real difference in their trading.

What you should be doing more of:


Things that don’t add much value and should be avoided:

  • Flipping through time frames and markets, hunting signals without doing your preparation
  • Following your trades tick by tick
  • Going through forums hoping to find a better trading method
  • Arguing with traders on social media
  • Micro-managing trades and being glued to the screen

The 5 last points are huge time wasters (I know that because I have been there myself), but most traders approach trading in the complete opposite way of what they should be doing and they spend the majority of their time on things that don’t help them become better traders.


#2 Micro-managing vs. set-and-forget

Micro-management is a HUGE performance killer for most (read: all) traders. Here are things traders do when they micro-manage their trades:

  • Watching trades tick for tick
  • Moving to lower time frames once in a trade
  • Looking for outside confirmation (social media, forums, news sites that have usually nothing to do with your system)
  • Constantly moving around stop loss and profit orders
  • Adding to trades and/or partially closing trades (usually without a plan)
  • Checking trades on the phone while on the gone

The set-and-forget approach is the complete opposite: after you have done your analysis and placed your trade, you set your stop loss and profit orders and then don’t look at your trade again. You let price do what it will do anyways and wait for price to either reach your profit or stop order. No manual interaction with your trade anymore!

I have seen first-hand that such an approach not only improves the quality of one’s trading, but it also boosts the performance when traders stop micro-managing their trades. The main reason why traders can’t stop this habit is because they don’t trust their system, they only think about the money involved, they haven’t validated their edge or don’t have any trading rules at all.


#3 Screen-time and boredom

Screen-time can be a good thing if you know what you are looking for. But if you just flip through time frames, hunt for signals, without really knowing what to expect, you are setting yourself up for failure.

Boredom is a dangerous emotion and it always leads to bad trading decisions, especially if it is combined with excessive screen-time. Here are some tips on how to create a better trading routine and eliminate boredom:

  1. Every Sunday, you analyze your markets and create trading plans.
  2. You identify the most important price levels for the week ahead.
  3. You set your price alerts at those levels.
  4. You wait for price to get there without watching the market.
  5. When your price alert goes off, you check the chart and evaluate whether you have a trading entry or not:
    1. Yes? Great, enter the trade.
    2. No? Set yourself a reminder to check back in a few hours or take the instrument off your watchlist if price movements made your trade idea invalid.
  6. You let the set and forget approach do the rest for you and don’t interfere with your trades again.

Most traders approach their trading very differently and often follow the same, old and generic advice that eventually brings them all very similar results. Maybe it’s time to do things differently and follow a new path if what you have been doing did not make you a better trader…



#4 Eliminate the need to trade

The need to trade is often what breaks the amateur trader. Having a trading edge means that you have a way of identifying very specific situations and price constellations that provide a positive long-term expectancy. Most traders make the mistake of believing that they have to be in the market all the time.

You may have a bias, but this does not automatically mean that you should be in a trade. Click To Tweet

It’s so important to understand the premise of your system and know under which conditions you have an edge and when you don’t. Traders have to be more selective and only enter when their system tells them to do so. Although this is very obvious, it’s hard to find amateur traders who follow this approach – this is where common sense isn’t so common in trading.

Focus on making 1 good trade a week – that’s really all you need.


#5 Minimizing errors easily

Take a look at pilots, physicians and other professions where little errors can end very badly. In all those fields, it’s common to use checklists to ensure that their standard procedures don’t get messed up. Traders can and should do the same. Trading is a game of pattern recognition and the process of scanning for and entering trades usually does not change. Thus, it’s very easy to implement a checklist that you go through before entering a potential trade. First, a checklist makes sure that you don’t forget anything, it also makes you more aware of your decisions and it holds you accountable.



#6 Get your priorities straight and finally stop over-trading

Do you want to become a trader because you want to trade or because you want to make money? In a recent interview, Jack Schwager described the importance of trading less to trade better nicely when he talked about Kevin Daly whom he interviewed in his book “Hedge Fund Wizards”:

Although Daly’s stock selection contributed to his success, being out of the market when the environment was highly averse to his strategy was the key factor underlying his superior performance. Or, in other words, the trades not taken were more important than the trades taken.

With the help of this article you should step back and audit your overall approach to trading. Here are the key take away messages from this article:

  • 80/20: Do more of the things that really make a difference and eliminate the time-wasters
  • Avoid micro-managing your trades and the habits that are connected with it
  • Try the set-and-forget approach to create a more stress-free trading environment
  • Don’t let inefficient screen-time and boredom enter your trading
  • Plan your trades ahead and let price come to you
  • Understand the premise of your system and know when to stay out
  • Utilize a checklist

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  1. I agree with most ideas from article except the fact that “set and forget” trading is a dangerous myth, there is no such thing as “set and forget” in trading.

    An open position has to be managed actively since the market could change any time. Of course, “managed” doesn’t mean “watching tick-by-tick”, or watching M1 on a multi-day position.

    BUT if the reasons for entering a certain trade have changed then sometimes the best thing to do is to exit, and not to wait like a bunny until the stoploss hits you in the face. I simply can’t believe in a “set-and-forget” approach. My two cents opinion.

    • Hi dvv,

      ‘Set and forget’ works, but you forget it for the time frame you’re trading from.

      I personally trade from daily time frames, so I don’t look at the trade until next day, because there’s no reason for me to make any decisions until the next daily bar has closed.

      I can tell you from my experience, it works and this is a stress free trading method I found. After all, I chose trading to make money and have free time to myself, not have another job by being in front of my computer all the time. I suggest you to check the concept of ‘illusion of control’ in trading.

      Good luck.

    • set and forget thing, you could also set alert when market move, the point is you don’t need to watch the chart all day long.

  2. G’day Rolf,

    Thank you for another great article. I am a recent subscriber to Tradeciety and I really enjoy reading all its content. The head game is so important in trading and the great advice in your article will be extremely valuable to traders at all levels. Thanks again and keep up the good work.


  3. Dear Rolf
    Great information for a new trader like me.

  4. Fantastic article! This came as a timely reminder for me as I’ve felt myself slip slightly off track.

    All of the info is spot on and took me a long time to accept/figure out…probably because some of it seems counter-intuitive (such as the set-and-forget mentality…that really boosted my performance). Setting up scenarios then letting alerts bring me to the charts is another one which improved my focus and made it easy (easIER!) to enter my trades as I knew that I was following my plan.

    You guys are putting out excellent information- thanks!


  5. Great article this is very help full for traders, and can i know what is the best % for risk when we open a trade

  6. Excellent article. Especially about alerts. That one thing has really improved my trading. No more staring at the screen. Just set my alerts at a key level and when it goes off…either place a trade or not. Simple.

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