There are many articles online that offer advice on how to prevent overtrading, in the sense of selling more goods than you are able to produce. WHile this is certainly an important topic, we define overtrading in a different way – placing too many trades on the stock market, which can lead to a lot of problems.

It is this sort of overtrading that we will be taking a look at in this article. It is a problem for many traders, some of whom can get overzealous, and thus make rash decisions, leading to losses. It is something of a psychological problem, and it can be corrected through restraint, by implementing some of the techniques we are going to lay down here. Let us take a look at these techniques.

Take a break after a big loss

No matter how good a trader you are, losses are an inevitable part of any trader’s career. It is important that you keep your cool when losses happen, otherwise you might make even more costly mistakes.

Naturally, the definition of a big loss is up to the trader themselves, but the universal thing that happens when we suffer a loss is that frustration sets in, followed by a strong need to prove to ourselves that we still have what it takes to be successful, no matter the recent downturn.

This will make you more prone to taking unnecessary risks, which might exacerbate the situation even further. That is why you should take a break, perhaps even go on a short vacation to soothe your nerves, so you can get back in the horse (or bull) with a clear head.

Set the number of trades you want to make per day


For many traders, swift trading can yield great returns, and it’s really all in a day’s work. However, overdoing it can have serious effects on your judgement as the trading day goes on.

That is why we suggest setting the number of trades you want to make per day in advance, and sticking to it. It could be as few as 5 or as many as 100, but whatever the number, you need to stick to it if you want to stay mentally fit for purpose.

The final number you arrive at will be the result of some experimentation, going back and forth between different caps, but once you settle on one, don’t change it arbitrarily. You will thank us later.

Set limits on both your profits and your losses

This is closely related to the previous piece of advice. It’s all about control, allowing yourself to think clearly within the confines you’ve set for yourself. It is obvious that you should set limits for your daily losses, since not doing so would result in bankruptcy pretty soon.

However, the reasons for limiting profits may not be so clear. It has to do with greed and pride, two deadly sins, which day traders are particularly prone to. Once you have a winning streak, you may be tempted to extend it by making more risky trades, which may result in losses. That is why you should know when enough is enough, and go down on a high note.

Trade a limited number of setups

 People who are open to any setup during the day are presented with an almost limitless number of trading opportunities. However, there are very few people who can keep trading all day and switch back and forth between many setups throughout.

That is why we advise sticking to only a few setups that you are most comfortable with, as this will help prevent overtrading, since you won’t be placing trades without being fully able to explain to yourself why you did so.

Limit the amount of time you spend looking at filters

The list of trades provided to you by filters based on your previous trades are a powerful tool in the arsenal of any trader. However, you shouldn’t spend all day looking at the ticks going up and down, waiting to press that trade button. This is something adrenaline junkies and amateurs do. No serious trader can afford to make such impulsive and un-strategic trades, mostly due to the fact that this often leads to losses, and you will have nobody to blame but yourself.

Don’t spend all day trading

 Many day traders consider trading a 9-5 job, but this is precisely the wrong mindset if you want to make money. Experience shows that most of the money you make on every given day will be in the morning, while most of the losses you will make will be in the afternoon.

Therefore, it seems an efficient choice to boost your profits and cut your losses by simply not trading in the afternoon. That way, you have more free time to pursue other interests, while also making more money, since most of the losses are accrued in the afternoon. It’s a win-win!