Over-trading: the Fatal Habit for 98% of Forex Traders

1. Everyone over-trades

Over-trading is so common in the foreign exchange market that there is hardly anyone who does not over-trade. Frequent full and heavy positions, buy-in and close-out during the day are very normal.

Over-trading is the most fatal habit for 98% of the traders in the foreign exchange market. Even if it’s just a 40% win or lose, after 10 times of winning and losing regardless of which one comes first, you will end up losing more than 90% of your capital.

However, if you win or lose 8% every time, you will still have more than 90% of the capital regardless of the order in which you earn and lose 10 times.

This might sound over-exaggerating, but it’s actually a quote from Technical Analysis of Stock Trends by John Magee, which is a landmark mentioned by almost every famous book about speculation.

The reason why I suggest a 2% fund management for beginners is to control the winning and losing in a minimum range which then keeps the fluctuation of funds at the smallest too. In this way, you will be able to survive in the market for a long time and reach profit gradually and slowly. Traders who are becoming more mature can enlarge their funds to 8%.

Fund management is a system and discipline that restricts over-trading. It is the core training of a trader's capability and ability to execute. A trader who can perform fund management will step out of the abyss and restore a new realm of trading.

2. Typical phenomenon and status of morbid trading 

Over-trading refers to frequent trading and heavy trading. It is an obvious feature of every trader who loses money in the forex market and is also typical of morbid trading in foreign exchange.

Over-trading is a typical addiction of morbid trading where over-traders are constantly in a state of extreme excitement, looming and stubbornness.

Among forex traders, you can see hyperactive and greedy ones killing in and out with full positions. This kind of operation brings immense excitement and pleasure to the trader, accelerate the secretion of the adrenal glands, and even a partial sexual stimulation. It will gradually lead people to get addicted to such kind of excitement, like a drunkard getting addicted to alcohol or drinking cough medicine with compound codeine. This may also be a subsidiary part of foreign exchange transactions to traders.

The leverage of foreign exchange gets traders excited, euphoric, and hallucinating. In fact, many traders have been staying in such a state of drunkenness for quite a long time, be it five, ten or twenty years, they may have never been sober. Therefore, the deleveraging of transactions is effective and efficient in reducing trading risks and avoiding greed, but it is also the most difficult to implement, because in the eyes of traders, it has taken away the original charm and magic of foreign exchange.

3. This market is more appealing to those with big egos 

It’s quite interesting. This market has gathered the greatest amount of greed and fear, but also ego and aggression.

I have been told by a trader who has been trading futures for ten years without making any money that: "I am destined to belong to futures, I came to this world for futures." He talked as if he was the evergreen singer who has dominated the market for decades who might say with pride that I was born to sing. In fact, the salesman of the entire Beijing sales department of the future company that he trades knows that "he doesn't wash his face every day, and his pockets are cleaner than his face." They have always thought that he came to this world to lose money. I actually joked to tell him that if he doesn’t come, maybe it’s better cos his customers will not lose money. He whispered cleverly to me that: "Other players will also pay off their money."

Another trader told me before entering the forex market: "I think I have talent in finance." Later I learned that in addition to his "talent to lose money", he was also keen on fortune telling and he believed Buddha. But for a decade, he has been doing "charity projects" in this market-donating money, although unwillingly.

4. Those with self-awareness could easily be saved

If anyone has the minimum amount of self-awareness and admits his disability and "mentally handicapped" in front of the market, he can easily be redeemed.

Just have a look at the trading methods adopted by most traders with a full position and over-trade oneself to death in the forex market, you will understand that to survive, you must take another method. All those who fell in the market were full position, front-end warriors, and "full position martyrs" moaned by the market. In order to survive, you must adopt fund management strategies to increase the thickness of the funds and the bouncing space for survival.

Those who fail to implement fund management appear to lack of self-awareness and restraint of one’s own greed and desire. Among traders, if anyone understands and executes fund management, he is not far from self-salvation, and he is on his way to self-salvation.

As a qualified forex trader, one must restrain himself from over-trading and slowly establish, implement, and carry out a fund management system, and gradually enter a stable life cycle, and then enter a period of growing profit.