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You are here: Home / Stocks / Commentary / 3 Signs You Are Overtrading

3 Signs You Are Overtrading

July 13, 2009 by Larry Connors

One of the common themes of successful traders is that they are patient and wait for high probability set-ups to occur. Then they take advantage of those set-ups.

Many aspiring traders don’t reach professional levels because they overtrade. They feel the more they trade, the more chances they will have to make money. This is incorrect.

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Here are the following three ways to diagnose whether or not you’re overtrading. Here’s what non-successful traders do and you want to make sure you’re not one of them

They’re looking for action. Meaning instead of following a high probability trading methodology, they’re taking trades on hunches with no statistical edges.

They subscribe to multiple newsletters (most without written, fully disclosed, track records) and they are at the same time watching the business channels looking for hot ideas. How is this any different than going to a racetrack and buying all the tout selections and also asking strangers “who they like”?

They trade for the rush. The more trades they do the better they feel. Behavioral psychologists refer to this as compulsive behavior and it’s a serious weakness in any profession or activity.

The good news is that traders like this have existed since the beginning of the markets and will be there forever. They often provide the high probability opportunities by emotionally reacting to prices, allowing markets to become even more overbought and oversold and providing the edges for those who are on the other side of the trade.

If you see yourself doing any of the above, learn to stop by keeping a journal which allows you to constantly monitor and reflect upon your behavior in order to change it. And if you are solid with your discipline and the above is not an issue, you’re in the very good position to take advantage of the many traders who do overtrade.

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Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.

Filed Under: Commentary, Recent Tagged With: high probability trading methodology, overtrade, overtrading, stock trading, successful trades, trading stocks, trading strategy

About Larry Connors

Larry Connors has over 30 years in the financial markets industry. His opinions have been featured at the Wall Street Journal, Bloomberg, Dow Jones, & many others. For over 15 years, Larry Connors and now Connors Research has provided the highest-quality, data-driven research on trading for individual investors, hedge funds, proprietary trading firms, and bank trading desks around the world.

Larry has been published extensively, with titles like How Markets Really Work, Short Term Trading Strategies That Work, High Probability ETF Trading, and The Connors Research Trading Strategy Series including our latest Guidebook High Probability Trading with Multiple Up & Down Days.

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