The Misnomer of Over Trading and How It Differs from Impulsive Trading.

Overtrading – the excessive buying and selling of securities by an investor in order to increase the probability of successful trades. Can the phenomena of over-trading be explained away by the singular use of a one line description, does this one sentence fully cater for all the nuances and complexity involved?

It’s suggested by many trading experts that over trading can kill accounts just as quickly as either a lack of capitalisation, or lack of expertise and experience. Whilst undeniably a logical conclusion does this claim actually stand up to scrutiny? After all swing traders could immediately condemn the phenomena of day trading in all its forms and in particular scalping as over trading, without even delving into the technique used they’d presume the trader was over trading. But one man’s meat is another’s poison and over trading may be as misunderstood a concept as other myths that have been allowed to evolve unchallenged in the industry..

“I’m trading four pairs; the euro, cable, euro-yen and the Aussie off fifteen minute time frames. I’m taking up to fifty trades per day and my win/lose ratio is as bad as 7:1 some days, what d’ya think the correct or average amount of legitimate set ups I should be getting each day, am I over trading?”

This is a version of a question often posted on trading forums or on the “ask the expert” sections of broker websites. On first inspection the impulse is to suggest that yes, taking that amount of trades on that amount of pairs is over trading. However, a huge chasm exists between what could be considered over trading and impulsive trading, in fact the concept of over trading may not exist, or if it does it may have become a victim of trader mistranslation.
Let’s look at our example trader and analyse his technique further.. Read the full article

Source: FX Central Clearing Ltd. (FXCC BLOG)