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How I Avoid Overtrading on Quiet Trading Days

Find yourself overtrading, especially on quiet days? Here are some tips that may help control or curb that impulse.

I am a pretty aggressive trader and need to remind myself occasionally not to overtrade on quiet days. My interest has never been to change this aspect in myself, because being aggressive has its perks. When the market is volatile I tend to do very well, but during quiet times this desire to “pounce” can be a problem. Here is how I tackle the overtrading issue on quiet days.

Pre-established Distractions to Help Curb Overtrading

If the market I am day trading is very active, then I’m focused on that and it will keep me engaged. No distraction required. But, if the market is quiet, then I have some pre-established “distractions” that I allow my focus to shift to (which saves me from making bad trades).

For example, I talk through every move the market is making. This allows me to plan out my trades in advance and gives my mind something to engage in between trades. I consider what needs to happen for a trade to occur, and then how I will handle that trade if it does occur in light of the current conditions. This is also beneficial during active markets. This is probably the best exercise to do while trading, as it keeps the mind engaged, improves trading and analysis skills, and makes sure you never miss a good opportunity. 

If things are really quiet and a trading opportunity isn’t likely to come along anytime soon, I often have my browser open and will read articles of interest that I have saved. I may also jot down notes for website articles, or actually post something on the website.

I have traded a demo account at the same time as trading my live account so that I could act out my impulses on the demo instead of with real money (which has led to some additional strategies being developed). I did this more when I started trading, but don’t do it anymore.

I have also traded or watched multiple markets at the same time. Usually when day trading I stick to just trading one thing, but when it is really quiet I may look for opportunities in other markets as well. If there are several days in a row that are very quiet, I also tend to expand my “watchlist.” I add more stocks, futures, or currency pairs to it, increasing the likelihood that I see some good trading opportunities.

I have also reviewed past trades. I take screenshots of my day trades and swing trades and will then will go through these charts, during quiet times, to see what I did well and what could be improved.

I do any one of these aforementioned things on one of my monitors, so I can still be watching my main market at all times on the other monitor. Rarely have I ever missed good trades by doing this, but it has saved me from taking a lot of bad ones. I am still focused on my main market, but if the market is quiet and isn’t doing anything I am content to have it bounce around on one screen while I check out things on the other.

Some may scoff at these ideas, but they have worked for me. Ultimately, having traded since 2005, I know my tendencies. It is unlikely I will change my trigger finger tendencies, so I have these distractions instead. And I don’t want to change this tendency because during volatile times it is that very tendency which reaps huge rewards. It is just a matter of knowing myself and knowing how to productively handle the situation.

Because of some personal beliefs–a belief that myself and Western society as a whole are over-stimulated–I have limited certain distractions while trading. No checking emails or social media. These things can be too distracting, may draw you in, and may cause you to miss trades.

Stillness–doing nothing during quiet times–is good too. This is another option. Some people will find a few distractions help their trading, while others may find no distractions is best. I now fall into both camps, so both “strategies” are viable.

Not All Distractions are Good Distractions

While I find having some distractions help, others may hinder. If I (or you) am trying to avoid overtrading, taking part in distractions that encourage trading isn’t wise.

When overtrading is an issue for me I will no watch the news (ie. CNBC) while trading. “News” and the varying market commentary can get in your head. Someone mentions a particular stock or commodity and all of a sudden you are taking a trade which isn’t part of your strategy, and which of course loses money. While I find it entertaining to watch them try to explain market moves, completely contradicting what they said 5 minutes ago, I avoid watching any news until after I’m finished trading.

In fact, I avoid anything that could be construed as “advice” while I am trading. When I’m finished trading I will listen to other’s opinions on markets and trading, but not while I’m actually trading. And I never act on anyone else’s strategy or advice without verifying and testing it out for myself first.

Have a Plan to Avoid Overtrading

Having a well laid out trading plan is crucial. My plan states what market movements need to occur in order for me to take trades. If those criteria aren’t present, I don’t trade. During periods when a trade is unlikely to develop I allow my attention to shift to some other things. I read that article…but all the while still have the market up on my other screen so I can monitor if anything is transpiring.

You should know your strategies so well that you can just glance at your chart and know if a trade is developing or not. If you are constantly questioning whether you have a valid trade signal or not, your strategy is not well-defined enough, or you haven’t mastered it. Creating a solid plan and putting it into practice over and over again–using a demo account initially–will give you the confidence you need to act and to stay away when conditions aren’t favorable. When you can quickly look at your chart and know if a trade setup is forming, that also means you don’t have to stare intently at your screen the whole day.

Overcoming Overtrading Takes Internal Work

My “distraction” method may seem simple and even enabling in a sense. But it actually took a lot of internal work to realize that with trading “less work is often better.” When I try to “grind it out” (telling myself “FOCUS, FOCUS, FOCUS!”) each day, I don’t enjoy it and I trade worse. Keeping my mind somewhat detached from the market, by allowing other activities while I am trading, has improved my trading and quality of life. That said, some other people are “grinders,” and having distractions around them may be an absolutely horrible way to trade.

Utilizing distractions (or not) should not be taken lightly. Deciding on this course action was the result of much reflecting, understanding myself, and understanding the markets. This course of action may not necessarily be what is best for someone else, especially if that person is prone to becoming too distracted and thus starts missing valid trades.

Final Thoughts on Overtrading

Trading is about you. Ultimately it is you that gets into and out of trades, not someone else. That means you have to find a way of doing things that works for you.

I trade best when I am bit detached. I glance at my chart, and when a trade is setting up, I focus on the market and executing my plan. If no trade is present, I work on other (non-trading) things. This prevents me from overtrading, especially on the very quiet days when there aren’t many opportunities.

It is about understanding who we are, and incorporating it into our trading…and life.

By Cory Mitchell, CMT

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