Saturday, May 9, 2009

Over Traders Anonymous: Here's A Great Tip

Over trading is the single most damaging thing to an account. the commissions alone will eventually slowly eat away at capital and that's not even taking into consideration the mental and emotional drain you will go thru. Your soul goes into a dark place when you over trade and get poor results. Sometimes it made me even angry and i used to lash out at others.

It took me years to figure out that trading more ironically meant more losses, NOT more profits. The less you do, the better. I average about 2-3 trades per day normally. Any more than that and you are opening up the potential to getting emotional. It's a fact, the more you trade, the more emotional you will be get and the less rational you will be get. You will to likely scalp too much and you end up going short and long and short and long. Your head will be all over the place. Like a vegas gambler looking for one more fix.

here's an awesome tip to avoid emotional trading or over trading: Make sure every trade have a story behind it. Give each trade a personality and a reason why you are in it. Write down in a quick email to yourself on why you like this trade. By the time you are done writing the email to yourself and you are getting ready to send it out, you have might already realized that this trade was an emotional reaction and there was nothing there to begin with. So before each trade, write an a email to yourself describing what you like about this trade and i guarantee you will realize that many of your trades are just emotionally driven visuals. At the end of the day, you can look back at those emails and see what you were thinking and what you were doing right or wrong.


Mark said...

Good reading. Another idea to combat over trading [courtesy of Hubert Senters at tradethemarkets] is a simple egg timer/hourglass that gets flipped and must complete its 2, 3, 5 minute or whatever rundown before the next trade can be taken.

Hey Stewie have you considered twitter instead of Friend Connect? Twitter is on fire and I'm sure you could build a big audience there. will tweet your blog posts and tweetdeck rocks as a day-to-day platform to filter/group/manage streams and shorten URL links with one click. Cheers and have a good weekend.

Stewie said...

Hi mark. i have a twitter account. my name is stewmiester. but i am not sure i like twitter to be honest. I find it very hard to follow so many different posts happening at once. Maybe i am missing something.

Stewie said...

just checked out i really like that format a lot better than twitter. it's actually really really cool!

Mark said...

I'm new to twitter as well. Lots of interesting traders there - DougKass, Fari hamzei (HamzeiAnalytics) LindaRaschke , etc.
Tweetdeck grouping helps filter the BS and agreed stocktwits is cool - hope to seeya there my acct name is reggiedunlop

Olivier Tischendorf said...

Hi Stewie,

great advice. I agree 100% with that one.

All the best from Germany,

NYC Trader said... is a great site. Just don't follow too many people, its distracting.

Stewie said...

Danke schön oliver! ;-)

Stewie said...

i like stocktwits but god damn it is impossible to track all these comments that keep being posted. i agree about limiting the number of followers.

Unknown said...

nice advice. no trades within a certain period of time after making a losing trade is a really good idea. i often compound a losing trade by instantly following up with another losing trade. gotta break that habit.

Stewie said...


that's when most traders are most emotional after a taking a loss. the harder you try to make up for that loss instantly, the more that loss buries you in the red. taking a break is the hardest thing to do BUT YOU NEED TO DO IT! once you take that break, you start to 'separate' yourself from that previous trade and start to think rationally again.

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