Lack of patience – traders who lack patience will overtrade as they will be taking opportunities that are not a part of their trading strategy and so will by nature be taking more trades than is necessary. Practise patience, look for opportunities to sit and watch the markets, make time to simply view and not do, maybe try practicing mindfulness to help you to identify and work with overcoming the urge to relieve the feeling of impatience. Learning to be patient is a great skill to develop as a trader, so do not see not trading as time wasted but rather as time well spent in developing the skill of patience.

In revenge – where traders have lost money through a trading loss, a mistake or fat finger etc there is often an urge to ‘get my money back’. Whilst the intention of such a behaviour/thought is positive the ensuing behaviour is often not. Traders who chase losses will be skewed towards taking any potential trade that could make money, regardless of whether it is a strategy trade or not as the mental framework, the goal as such is now to make money and not to trade the strategy. Where you have had a big loss or lost a large amount of money through a series of trades you may wish to incorporate a ritual to take a time out. This time out allows you time to readdress your trading state and to refocus but also and importantly breaks the behavioural pattern of lose money → feel angry  → get money back. The time out causes a break in the behavioural pattern and enables you to refocus – using breathing and relaxation techniques or taking a slow walk can all help to diffuse the emotions that are running through the system at this time at reduce the impact of revenge trading.

Fatigue – when you are tired, either physically or mentally, your brain lacks the energy to function fully, and on low fuel one impact on your performance will be a lower level of self-control. Self-control, not trading, requires you to apply the brakes in your brain to stop you trading and this takes fuel. When you are tired and fuel is low your self-control will also be low, and overtrading will be more likely. The two keys to optimising brain functioning at an energy level are rest and glucose (from eating). Make sure, as far as you can, that when you are trading you are rested and have fuelled up.

Focus – focusing on not overtrading can be counter-productive as one of my clients found out – be continually thinking about not overtrading you are of course by nature thinking about overtrading, and you are also creating an internal resistance – try to not think about a white bear. When I asked my client what he would be doing if he was not over trading he answered that he would be ‘being patient and selective’ – focus on that instead I said. He made a considerable difference by simply shifting his focus to the positive outcome that he wanted rather than what he was trying to avoid.

So there are a few reasons behind why traders overtrade and some possible solutions for helping you to overcome them. Consider which might be the most appropriate for your situation, give them a try and let me know how it goes.

Steve Ward
Traders Coach
If you would like a trading performance or psychology question answered by Steve please send it to askthecoach@fxtradermagazine.com