Overtrading: Causes and Prevention
⚡ Read this before you open your next trade
Overtrading means taking more trades than your strategy justifies or sizing positions beyond your risk rules. It can be driven by boredom, excitement, revenge, or simply poor discipline. The result is excessive commission costs, emotional fatigue, and diminished edge. Most traders who track their statistics discover that their best months involve fewer, higher-quality trades.
Types of Overtrading
There are two types: frequency overtrading (too many trades) and size overtrading (too-large positions). Frequency overtrading happens when you force trades that do not meet your criteria. Size overtrading occurs when emotions — often greed or revenge — push you to risk more than your plan allows. Both types erode your edge and increase the probability of significant drawdowns.
Root Causes
Common causes include: no daily trade limit, boredom during quiet markets, a need for action or excitement, insufficient self-awareness of emotional state, lack of a clear trading plan with specific entry criteria, and comparing yourself to other traders who appear to trade more frequently. Address the root cause rather than just the symptom.
Prevention Checklist
Before every trade, check: Does this setup meet all my criteria? Am I within my daily trade limit? Is my position size within my risk rules? Am I emotionally neutral? Would I be comfortable if this trade hits my stop loss? If the answer to any question is no, skip the trade. The best trade is often no trade at all.
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Frequently Asked Questions
How many trades per day is overtrading?
There is no universal number — it depends on your strategy. A scalper might take 10-20 trades legitimately. For a swing trader, 2-3 trades per day might already be overtrading. The key is whether each trade meets your criteria.
Does overtrading increase broker profits?
Yes. Every trade incurs spread and/or commission costs. Overtrading significantly increases transaction costs, which eat into your returns over time, especially on lower timeframes.
Can automation help prevent overtrading?
Yes, tools like trading journals with daily limits, platform alerts, and even automated systems that block trading after a set number of trades can help enforce discipline when willpower alone is not enough.
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About the author
Kacper MrukXAUUSD & ETHUSD Trader | Macro + options data | Think, don't follow
Creator of Take Profit Trader's App. Specializes in XAUUSD and ETHUSD, combining macro analysis with options data. He teaches not how to trade, but how to think in the market. Actively trading since 2020.
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