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Are You Overtrading? Here’s How to Stop

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Man overtrading at computer desk

Happy Friday!

This week’s question comes from David, who asks:

How can I stop overtrading?

When I first entered the Forex market in 2007, I was trading from the 15-minute chart. As you might expect, I was opening several positions each day.

I even went through a phase where I was waking up at 3 am EST for the London open. I enjoy getting up early, but not that early.

Part of the reason I was using the 15-minute chart is because I believed that more trades would equal more profit.

It makes sense, right?

If you can make two or three percent on a trade that lasts two weeks, why not make the same in two hours?

Boy was I wrong. Trading from the intraday time frames only served to deplete my funds that much faster.

You may have a similar story to mine. I would bet most Forex traders do.

The good news is, there are a few simple ways to avoid that type of situation altogether—not only by trading from the daily charts, but by using other techniques that I’m about to show you. They are incredibly simple, yet powerful enough to get you to stop overtrading.

Read on to learn how I stopped overtrading, and how you can too.

Are You Overtrading?

Before we get to the meat and potatoes of today’s lesson, let’s define what it means to overtrade.

Put simply, overtrading is the act of trading too frequently.

As you may well know, the best traders in the world exhibit an obscene amount of patience. That’s because quality setups take time to materialize.

The successful traders know this, so they stay patient and wait for confirmation.

It doesn’t matter if the setup takes three days or three weeks to materialize. What matters is protecting their capital, and they do this by waiting for confirmation before entering.

On average, I take between five and ten setups per month. That’s it!

To put things in perspective, I trade 22 currency pairs and stick to the daily time frame 90% of the time.

That should give you a good starting point if you watch a similar basket of currency pairs. If you do and you traded 40 times last month, there’s no doubt that you’re overtrading.

But you will know if you’re trading too frequently. When you exit for a loss but know deep down that you shouldn’t have taken the trade, that’s a strong signal that you’re frequency is too high.

And if you get that feeling multiple times each month, you’re most certainly overtrading.

Now that we’ve discussed what it means to overtrade, let me share a few simple ways to break the bad habit.

1. Plan Your Week in Advance

Plan week in advanceOne of the best ways to trade less frequently is to plan your week ahead of time. I found weekends to work well for me.

When you do your analysis, be sure to identify potential setups. That way if something worthwhile does materialize, you will know that you’re acting on a plan and not making a spur of the moment decision.

Those who have tried this approach have told me their trading improved almost instantly.

What’s more is that those same traders admitted that they’ve lowered their stress and anxiety levels considerably since planning their trades in advance.

Instead of chasing setups throughout the week, they can just sit back and wait for quality setups to materialize. It’s a ‘wait and see’ approach that has worked incredibly well for me, and hundreds of other Forex traders.

2. Trade From the Daily Time Frame and Nothing Else

Calendar showing days of weekLet’s assume for a moment that you trade 20 currency pairs and utilize the 1-hour time frame.

That’s 480 candles to keep track of every 24 hours.

Granted, you won’t be at your computer for each one, but even if we cut that in half it’s still 240 candlesticks each day.

Compare that to the daily time frame where there are only 20 candlesticks in a 24 hour period.

Which environment do you think contributes to overtrading more than the other?

I think you will agree that keeping track of hundreds of candlesticks each day makes it much easier to fall victim to overtrading.

I’m a firm believer in keeping things simple. It’s why I got rid of indicators years ago and it’s also the reason I trade the daily time frame.

One of the most common concerns I get from people who want to join my community is the number of setups we get each month.

I get it. If you’re watching 20 currency pairs, that’s just 20 candles to look at each day. How on earth could you possibly trade enough to earn a substantial return?

You know what, though?

Trading less is a good thing. It’s one reason the daily time frame will improve your trading. By slowing things down, you’re able to plan trades ahead of time, which removes emotion from your trading.

It’s okay if you’re still not convinced. I do, however, ask that you give the daily time frame a try. For all you know it could be the missing link.

3. Give Yourself a Weekly Limit

Bag of money with lockA more unconventional approach to avoid overtrading is to give yourself a weekly trade limit.

Here’s how that works…

At the beginning of each week, give yourself a limit of two or three setups. Once you reach your limit, you must stop trading until a new week begins.

You can use whatever number you’d like. However, I would urge you to not exceed three setups each week if you are trading the daily time frame.

Using a weekly trade limit will do three things to help your performance:

  1. It will force you to plan your trades. Since you will have a limited number of opportunities, you will want to make sure each one counts.
  2. You will be less likely to give back profits. You’re most vulnerable after a winning trade. If you know you only have one or two trades left for the week, you’ll be more likely to stay patient after a win.
  3. You’ll be less likely to trade in the first 24 hours. Mondays are typically one of the worst days to trade, as buyers and sellers are still settling in from the weekend. If you know you can only trade twice that week, you’ll be less likely to use one up right off the bat.

4. Focus on Months and Years, Not Days and Weeks

Paper showing long term thinkingTrading is a long-term endeavor. You won’t find consistent profits after a few days or weeks, much less massive success.

Yet this is how many Forex traders approach the market.

In fact, it’s the very reason overtrading is such a common issue among traders. Instead of being content with three or four percent profit in a month, they want thirty percent.

The three techniques we just discussed are mechanical changes you can make. In other words, they’re changes you can see.

However, without the right mental shift, those changes will fall flat.

So the next time you sit down to look at your charts, try to plan your approach based on where you hope your account will be in two or three years.

Don’t concern yourself with making thirty percent profit this month because that inevitably leads to overtrading.

As for how long it will take you to be able to trade full time, don’t think about it.

Focus on the process instead. Put your time and energy toward staying patient, sticking to the daily time frame and planning your week in advance.

Slow and steady wins the race. Even many of the legendary traders of our time started with just a few thousand dollars.

Final Words

Overtrading is one of the most common and costly bad habits experienced by Forex traders. It’s easy to assume that the more you trade, the more you stand to make.

However, the opposite is true. Trading is a game of patience. Those who wait for quality setups and do nothing in the meantime are the ones who succeed.

One of the best ways to do just that is to use the daily time frame and nothing else. The limited number of daily candles will help you stay on the sideline while waiting for an opportune time to strike.

Try to plan your trading week ahead of time. I find the weekend works well. By doing your analysis and creating a watch list ahead of time, you’ll be less likely to chase subpar setups throughout the week.

Giving yourself a weekly trade limit is another excellent way to stop overtrading. Aim for just two or three trades each week. You will be amazed at just how quickly this simple change will improve your trading performance.

If you want to succeed in this business, you have to start thinking long-term. Don’t stress over one loss, or even a losing week. Instead, stay focused on how you perform over the coming months and years.

A long-term perspective will allow you to see the power of a ‘less is more’ approach.

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Your Turn: Ask Justin Anything

I’d love for this new weekly Q&A to be successful and provide an invaluable repository of answers to common Forex questions.

To do that, I need your help.

Here’s what you can do to get involved and have your question answered in next week’s post:

  1. Ask questions. Post them in the comments below or Tweet them to me @JustinBennettFX
  2. Help me answer questions. If I missed something or if you have something to add, don’t hesitate to leave a comment below.
  • Cho cho nwanne! says:

    Do you sell signals?

  • gbenga says:

    I used to trade h1 and m15 till moved to H4 and D1 chartsjust last week Monday. Last week was also my first week i made good profit and kept it. Certainly not a coincidence. Thanks Justin

  • Anant says:

    Is monthly chart a good option to trade as a long term trader

    • You could go that route but I’m not sure you would want to hold positions for years.

  • Petrus says:

    It is nice to hear that you take 5 to 9 trades each month using daily time frame. However, I found that it is hard to find 5 to 9 good set up for daily time frame each month. That is why I trend to chase the market or trade.
    Could you help us to believe that it is true and possible to do 5 to 9 trades each month using daily time frame by in the beginning of each month you Will be posting the trades you have taken previous month? By doing that, we Will see and know and believe that what you are describing above is true not. The problem I found for almost any price action guru or mentor is they never post the trades they have taken. Without proof, why you think people would believe what you teach?

    • Petrus, I do occasionally mention the trades I take in the member’s area. Those who have studied and implemented what I teach know for a fact that it’s possible to find five to ten quality setups each month.

      • Petrus says:

        Okay, understand that you do that for the member. But, why not just posting your trades that have been closed for free for the sake of others learning?

    • Roy Peters says:

      I am a member Petrus and it is true.
      You only need up to 10 trades a month to be profitable. Read the article again and then really apply what is being said. It works!

  • Emuobo Agbahovbe says:

    I must confess, I used to chase trades but after the webinar last Saturday I have stopped. I now use the daily and 4h charts. I made my first really profitable trade over 100 pips. Justin you rock. I want to learn more.

  • ALI BABA says:

    thank you for this highly valuable information.

  • Darius says:

    I am often thinking that I am missing profit. Also I get bored to wait so long. I want action.
    Now it is weekend and I started to hate weekends because there is no forex action.

    I was playing poker before that, and there was always action at least at micro stakes which I played. Actually I could theoretically combine poker for action and forex for wayting.
    But the problem is I think I miss the potential profit.

  • Hey Justin, thanks for the article and weekly forecasts. My subscription to your info is the first in many years that I didn’t cancel after just a couple of weeks.

    This article about overtrading was good, but also pretty conventional thinking. I’m always pushing limits, so I’m doing just what you advise against. No offense, it’s just how progress *of* an art to a better state is made (in contrast to progress *in* the art in its current state).

    I wanted to ask what you’d think of a method that yields 1% per day of trading, on average?

    • Millard J Melnyk says:

      *I should have said “1% gain per day of trading, on average?”

    • Honestly, I think it’s always a terrible idea to force a certain percentage gain within a specified period of time. You have to take what the market gives you, and it won’t give you 1% every day.

      • Millard J Melnyk says:

        OK, well thanks. The market is more than capable of giving 1% per day, so I guess we’ll see.

        On a completely different tack, another question.

        It’s impossible to avoid being upside-down in a trade for at least some of the time. The only way to avoid it would be to pick entry points perfectly.

        So, assuming that’s true for you too, how much of the time while you’re in a trade do you typically spend showing a loss for that trade? More than half the time or less?

        Or, do you solely work off of preselected stop points, regardless how long a trade hovers in negative territory?

  • Oludare says:

    Can one be a successful trader only with technical analysis without bothering on fundamental analysis?

    • Yes, of course. You should know when events are scheduled, but the chart will tell you everything you need to know.

  • Ailenubhi Joshua Oseikhe says:

    Thanks a lot. I am new here and in forex still trading on demo though i trade on daily timeframe but am so apprehensive that anytime it turns to negative, I would always close the trade against and take the new trend and eventually it turns again, I do same thing and it makes me count too many losses. Please, can you send me a post that will guide me how to locate a strong signals that I can really build confidence on? Please am waiting.

  • Ndabezitha says:

    Hi Justin, Thank you so much for your hard work and determination you provide to us traders. You are the only one I have not subscribed on because I follow your post on charts and analysis. I must say the are quite simple and easy to understand hence I am now profitable by following you.
    How do I become a member, But I cannot at this point join webiners, they consume a lot of data.
    Thank you Justin, Stay Blessed. Can I please be added on member group

  • Allen says:

    Trading intraday time frame don’t necessarily mean over trading
    It also don’t mean high frenquency .Every trend develops from the small time frame.
    They key here is let your profit run. This really don’t mater if you start with big or small time frame

    • Allen, I never said that trading intraday time frames means you’re overtrading. I said that it’s easier to overtrade on a 15-minute chart than it is on a daily chart. That’s from my own experience over the last decade as well as more than 1,000 DPA members.

  • Allen says:

    I personally think if you can’t trade intraday time well, how can you expect to trade well on larger time frame if you are doing the same thing? It really don’t mean if you fail on intraday time frame then you can succeed on day or weekly time frame. The difference is only you will blow your account slowly by trading larger time frame. No offense!
    Its just my opinion. The point here is if you are doomed to blow your account eventually, I would rather to have it happened sooner and find another solution.

    • We will have to agree to disagree. Moving to the daily time frame years ago was the best thing I’ve ever done. I’ve also never heard someone say that they struggled on the daily but found success on a 15-minute chart. I have, however, heard from hundreds of traders who moved from intraday charts to daily charts and started to achieve success.

  • Muntu says:

    Thank you very much for your updates and knowledge. I blew my account because of overtrading and not following my trading plan. I will exercise some petience in this game.

  • Dave says:

    Thanks to your excellent posts I have now opened a daily chart on a split screen with a lower time frame and also using a strength meter to help me to take intraday trades. The daily part of the screen helps me with direction and to look for set ups while the smaller time frame with the strength meter gets me in/out of the trade if it reverses. Justin, thank you so much for your insight and expertise, I’m beginning to think and do things in a completely different way which I’m sure will give me the success I’m looking for. Please continue with passing on your experience as a successful trader.

  • Beny P says:

    Terima kasih atas artikel Justin. ini sangat membantu untuk mengubah cara trading saya. dan sekarang harus belajar bersabar untuk menunggu setup.terimakasih ,

  • Beny P says:

    Hi, Justin. apakah kita dalam trading harus menghitung range suatu pair per hari ,per Bulan.thanks

  • Felix Uchendu Eni says:

    I want to join your trading community or group. Please how do I join and what will it cost me? Waiting for your response please in my email or Whatsapp – +2348035531739

  • Felix Uchendu Eni says:

    I want to join your trading community or group. Please how do I join and what will it cost me? Waiting for your response please in my email or Whatsapp – +2348035531739

  • Andrew says:

    Totally agree with you, better to trade with quality trade vs quantity trade. I used to trade using the lower timeframe chart and poor money management, chasing after trades that resulted in many losing trades vs the winning one. I have since regroup my trading style using only the daily (trade set up) and weekly (as guides) after following your writeup and recommendation to read up book by Mark Douglas.

  • Zuberu says:

    what is the realistic monthly forex profit in percentage.

    • Don’t even concern yourself with that until you’ve mastered the process. Until then, numbers like monthly profit, pips gained, etc. will just get in your way. Focus on things like finding quality setups and managing risk and let everything else fall into place.

  • MUNGE says:

    Great article there sir thanks alot.

  • MUNGE says:

    On the limit I bet to differ because as a long term trader that may your best set up and trade for the whole month and as you usually say let your wins over ride the losers so limits may not be really okay.

  • Steven says:

    Thanks Justin you are star, since i started following you i am doing better and the future is bright.

  • Vincent Staples says:

    Thanks for this article Justin. It is a real eye opener. I can see how easy it is to overtrade.

    You say you take between 5 and 10 setups per month and only trade on the daily timeframe. You give regular commentary on various currency pairs that are developing into a potential trade. Yet I have never seen you actually say – “I think this setup is great and I’m taking a trade”.

    Now I know you don’t offer a signal service, but for the beginner, it would be great to know that the ‘master’ is actually in a trade. I realize that you discourage your students from copyng you and I can see why – we need to learn how to trade by ourselves. But what a huge boost it would be to know that you are in a trade and then we can decide if we want to follow suit! Over time, this would build our confidence and then we would be able to go it alone, so to speak.

    So I am asking you to tell us when you are confident enough to take a trade and we get to see how it actually works. Seeing you ply your trade (pun intended) would be an amazing experience and the quickest way to learn.

    Your analysis is brilliant but it never actually tells us when to pull the trigger! Please let us know when you take a trade when a given set-up meets your criteria. You always seem to say, it could be ‘long’ or it could be ‘short’ and I’m left wondering what I should do. I need confidence that you, as a successful trader, could easily provide. That’s why I joined you.

    Many thanks
    Vincent

    • Vincent, thanks for the feedback. I don’t do that because, as you say, I comment on ‘potential’ setups. So the reason I don’t say “I’m taking this trade” is because there is often no confirmed setup just yet.

      As I mentioned to another reader above, I do occasionally call my entries in the member’s area. I don’t do it all the time because I don’t want people to follow me in on a trade without doing their due diligence. And as much as I would like to believe folks know better than to do that, experience tells me otherwise.

      Also, if you’re a member and you want to know what I’m doing in a particular situation, just ask.

    • Darius says:

      I was thinking same

      • Darius says:

        My comment was to Vincent Staples

  • Habibur Rahman says:

    Boss, I am glad reading your article. I must try your suggestion. Please, add me to your trading community.

  • Darius says:

    Can I count 2 or more smaller trades as one trade? I do often enter not full amount which I am dedicated to 1 pair. Like when I am not sure if the situation is best, but at the same time I do not want to be late. And then later if the situation becomes better (getting better price and risk reward ratio) I enter more money.

    Like first 90 % of money into first trade which has risk reward of 2 lets say. And later 10 % of money but risk reward is like 9. So from that same 10 % I can get huge profit.

    • Sure, you can scale in, but the two positions should count as one from a risk perspective.

  • Mz says:

    Hi Justin

    You say successful traders wait for confirmation before entering. What exactly does this mean? Are you referring to pinbars and such? The reason I ask is such signals (pinbars) do not always form, yet your trend line might suggest to you the area where your price should turn. Will wait for your feedback, thank you.

    • Price action signals like pin bars are one way to confirm a setup. However, sometimes a daily close above or below the level followed by a retest is enough.

  • Kennedy says:

    Hello Justin ,how do you trade using fundamental analysis

  • Stephen says:

    Hi Justin, been following you for quite awhile now and no doubt will be signing up. My question is why are there not 24 candles on an hourly chart,and one candle on a daily chart. I always thought it was one candle for that particular time frame. Thank you for your response, and all your educational information concerning forex trading is very much appreciated.

  • yousef says:

    It is precious advice, thank you.

  • Chuck says:

    Hi Justin. I’ve sent 2 emails asking about which forex broker you’ve been happy using. Can you reply please. Thanks. Love the site and education you provide

  • Mimi says:

    Hi Justin, do you take “seasonality” into consideration with your trading and how (if) important is this?

  • babu narayanan says:

    planning a week ahead really i dont understand how will i do that?

  • Linda says:

    Is it your belief that only swing and position traders make money? I get that it’s easier to learn to trade on the daily charts, but you can make the same money more quickly if you master the 4 hour or lower charts. What if you’re free to spend time in front of the computer every day and you love trading?

  • Lesley says:

    Hi Justin. Actually it’s an enquiry. My son wants to join your community group and would love to know how to enrol

  • Amicable says:

    Honestly I am a victim of that and I have lost so much than gain.this information is helpful.

    *plz can you be alerting us about your trade signals?* THANK JUSTIN

  • mjalakkary says:

    Thank you for you’re highly help full information
    Please help with the following idea
    “How to get rid of hedging losses and increase daily craft swap?”

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