TRADE LESS, MAKE MORE

I’ve realised recently I’ve been getting a lot of emails from people who find they are losing and the reason is...

Overtrading!

A good example is this message I received:

“I started trading about 3 months ago and have made some losses (lost around 10 grand) despite the market doing quite well during this period, not fun.

 So over the last few days I decided to analyse where I’ve gone wrong and punched every transaction into spreadsheet, over 100, I’ve been overtrading.”

Yes, 100 trades is way, way too many, overtrading nearly always leads to losses as your ten grand loss in a bull market shows.

Indeed my thoughts are quite simple: Trade Less, Make More!

Any spreadbetting firm will tell you those who trade the most lose the most and there are many reasons for that. Costs soon mount up – for every trade there is a cost, whether it is commission or indeed simply the cost of the spread. Those costs will soon add up.

If you are making 100 trades in three months it is just way too much. You will end up losing control of your trades and your brain will go into meltdown. For the average investor probably a max of 5-10 trades a month is enough.

Some days there should be nothing to do at all. You don’t HAVE to make a trade. You only ought to make one if you are absolutely sure about it and definitely NOT out of boredom. Or because someone on a bulletin board persuaded you. Only make a trade after you have done proper research and made an informed decision.

Remember every trade you make needs some looking after. The more trades you make the more looking after is needed. The more time you will spend at the screen and the harder it will become.

With the really good trades, you bought and added occasionally and they carried on going up over time.

The worst trades are in very volatile stocks. You’ll find you’ll overtrade trying to keep up with the damn thing.

If you are not sure about a trade go out for a walk and think about it. Only press that buy button when you are totally sure.

I remember a spreadbetting firm telling me the best winning traders held onto the trade for nearly 2 months and they did not make hundreds of trades.

So, take a look at your trade history. Is there too much there? If so, re-think!