Over trading is when a trader takes a trade based on fear, greed, desperation, or ego instead of a valid entry signal. Over trading is due mostly to wanting to be profitable so bad that impulses are driving decisions instead of a trading plan. If a trader has an edge over the markets then they want to take the trades presented to them, the more signals the better. If a trader takes trades that are not based on robust entry parameters the more trades they take the quicker their undoing and demise.

  1. For smaller accounts over trading can rack up large commission costs that can eat into profitability.
  2. The bid/ask spread is an expense that pays the market makers at your expense. The more you trade the more you pay.
  3. The more you trade the more you can be front run and gamed by High Frequency Traders. You can beat High Frequency Traders with Low Frequency Trading.
  4. Trading too much gets you into bad entries when you should have been waiting for good entries. Entries have to be based on signals and risk/reward ratios not the emotional chasing of gains.
  5. Over trading is bad trading. Generally over trading is the external results of bad internal self controls. It is the epitome of not having a trading plan, lacking discipline, and not following a trading plan. Over trading will cause you to lose faith in yourself as a trader with the discipline to follow a plan. Over trading can lead to mental ruin only take the right trades that meet your own guidelines and trading plan based on homework and research.