BEWARE OF OVERTRADING

                  Without capital in your account, you’re dead as a trader; therefore, protecting
your trading capital should be your top priority. Anytime you open
a trade you are placing capital at risk, so it is important to select only the

best trades and have a good reason to risk capital. Unfortunately, many
traders are eager to earn money and assume that the more they trade, the
more potential they have to make a few more pips, but it doesn’t work
that way in the real world of trading. You can’t force the market to give
you a decent trade simply because you want to trade; if you are, you’reovertrading. Traders overtrade due to a lack of discipline to stick to a solid
trading methodology, boredom, or greed and are failing to manage risk to
their trading capital. Here are some common warning signs that you could
be overtrading:

•  Unable to explain why you took some recent trades
•  Making a profit but giving it all back by the end of the month
•  Studying charts and looking for trades more than eight hours a day
•  Taking trades because you “believe” price will go a certain way

Correcting overtrading is the responsibility of the individual trader,
but I do have a suggestion: Stop trading on short timeframes. Most of the
traders I see prone to overtrading are trying to trade 5- or 15-minute charts
during the London or New York trading sessions. These traders are bombarded
with price action because the market is very active at those times,
and they end up chasing price all over the chart trying to make another
pip. I advocate trading a longer timeframe. You do not need to earn 1,000
pips a month to make a good return on your capital, so why threaten your
account with multiple trades when you don’t need to? The daily or weekly
charts might only offer one or two trades a week versus several a day, but
less trading means less risk and more focus. Long-term trading can also
reduce the cost of trading, as you will see in the next section.