Over trading: Over trading comes in two main forms:
- Trading too often in the market: Trading too often in the market suggests that there is always something going on and that you always know what it is. If you always have a position open, you’re constantly exposed to market risk. But the essence of disciplined trading is minimizing your exposure to unnecessary market risk. Instead, focus on trade opportunities where you think you’ve got an edge, and apply a disciplined trade strategy to them.
- Trading too many positions at once: Trading too many positions at once also suggests that you’re able to spot multiple trade opportunities and exploit them simultaneously. More likely, you’re throwing darts at the board, hoping something sticks. Trading too many positions also eats up your available margin collateral, reducing your cushion against adverse market movements.
Be careful about trade duplication and overlapping positions — a long USD/CHF position can be the same as a short EUR/USD or GBP/USD (all long USD versus Europe), while a short EUR/USD and a long EUR/JPY position nets out to be the same as being long USD/JPY.
Be on the lookout for my next blog where I will reveal 2 more "beginner" trading mistakes!!
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