Chronic Overtrader? We've Got Your Cure

Take this quiz to identify the personality quirks that could be causing you to overtrade and stray from your risk management plan. Then learn simple behaviora

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https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Get your overtrading cure
3 min read

Trading is a learned behavior that takes smarts, discipline, and a whole lot of patience. But novice traders often jump in unprepared and without an action plan. They can quickly find themselves in the “overtrading” abyss—a place they could have avoided by taking the time to learn about markets and experimenting to find the strategies that work best for them.

Take This Quiz

Are you an overtrader? Here’s a quick quiz to help identify common overtrading blunders:

1. Are you a trading thrill seeker? If you get an internal jolt every time you enter a trade, you may be a trading thrill seeker. Successful traders often admit that profitable trading and investing is boring, but after all, this isn’t a carnival. Identify your setup, enter your order, set your stop-loss, and take your profit or loss. Boom, do it again. Looking for a joy ride? Find a roller coaster.

2. Do you jump from one trading strategy to another? This is a lesson in less is more. Successful traders focus on one approach, become an expert, and stick to it.

3. Are commissions eating up your profits? Tsk, tsk. You don’t need a big pile of trades to be profitable. This may be a sign you are putting on too many trades and not letting your profits accumulate.

4. Are you a revenge trader? Although trading has sometimes been called legalized gambling, the fact is, you’re not in a casino. Don’t fall into the trap of reacting to a trading loss with an immediate desire to make back the cash—that can lead to sloppy mistakes. As Frank Sinatra once said, “The best revenge is massive success.” You won’t get there by being a revenge trader.

5. Do you exit a trade immediately after it becomes profitable? Good risk management is paramount for any trader or investor, and that includes letting your profits run. No matter what your trading approach, develop a risk/reward ratio that you are comfortable with.

Kick the Overtrading Habit

If you answered yes to any of these questions, here are some tips to help you break the overtrading habit.

Create a trading plan. Write out a detailed trading plan that outlines what signals or indicators you need to see in order to put on a trade.

Define your risk management ratio. Learn to let your profits grow. Don't exit profitable trades immediately. Look for reasons to stay in the trade. A traditional reward/risk metric is 3:1. Determine what works for you.

Know the end goal. Identify where you will exit a position before you enter.

Perfect your strategy. Paper or demo trade your methodology until you see consistent success.

Write out your trade ideas ahead of time. Think your moves through the night before or over the weekend. Only put on trades you've written out.

Be cautious. If you aren't sure, stay on the sidelines.

Keep detailed journals of your trading activity. Analyze the results on a weekly, monthly, or quarterly basis, depending on your trading time frame. Look for patterns of mistakes, including exiting too early, not sticking to your stop-loss exit points, or taking trades that aren't on your trading plan. Measure your performance: look at average profit, average loss, win percentage, and average drawdowns.

Think small. Scale down your position size.

Then stop thinking. Don't form new opinions during the trading day. Stick to your list of pre-planned trades.

Take a trading break. If you've had a string of losers, take a trading time-out. A few days or even a few weeks will help clear your head. Go back to demo trading until you see success on paper.


Achieving consistent, profitable trading is a journey. These tips can help you cure your overtrading tendencies and stay on the road to trade another day.

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