In the world of forex trading, you may know what overtrading or excessive trading activities are. A trader is said to be overtrading if he makes too many forex transactions to exceed the fairness limit of transactions in general.
Although sometimes this has the potential to provide more profit, overtrading more often hurts your trading portfolio and overall assets. According to Quant Share, the traders should always be on their toes because overtrading can cause these terrible consequences. Why so?
Check out why overtrading is bad since almost always raises the following risks:
Lost of Chance
Many traders who are trapped in over trading miss the opportunity to achieve the profit they can get. This is due to incorrect and undercooked calculations. It can disrupt the analysis process in market conditions.
Then, the trader is most likely to open or close a position at the wrong time and currency pair. Thus, they will miss out on opportunities that are currently open in other currency pairs.
Poor Financial Management
When a trader opens too many positions, he will have difficulty carrying out the proper financial management in each of his trading positions. Most likely, the trader does not realize that some of his trading positions have suffered significant losses due to a large number of positions that must be monitored at all times.
Trading rashly
No less important, overtrading can also make you emotional and decide to trade outside the trading plan that you have made. This is vulnerable to traders who have experienced significant losses from previous trading positions.
The desire to immediately cover losses can make the trader reopen the next trading position without careful analysis and preparation. This will further increase the risk and loss of the trading position.
By understanding the dangers of overtrading above, you can train yourself to better plan your trading.
Read more: Tips to Divide Trading Time for Beginners
