Less trading, more earning?
2024-05-06
Overtrading and overmanaging plague many traders, and this is even the main reason for the failure of some traders. Despite this, in trading, only a few people are clear about why they overtrade, and only a handful know how to get rid of the bad habit of overtrading.
Next, this article will explore the common problems that many traders encounter and how they solve various problems caused by overtrading or overmanaging, and understand how they become a trader who trades less but better.
The "80/20 Rule" in Trading
80% of sales revenue comes from 20% of customers, 80% of sales tasks are completed by 20% of salespeople, 80% of complaints come from 20% of customers, and 80% of wealth is owned by 20% of people, etc., are all typical examples of the "80/20 Rule."
In trading, 80% of trading results also depend on your 20% of trading behaviors, but most traders cannot fully understand its meaning. In fact, the "80/20 Rule" mainly illustrates the importance of key factors, and key factors determine the level of trading.
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To grasp these key factors, first, traders need to create and manage a watchlist, set price alerts at important points, record each trade, evaluate trades, and create rules and guidelines in their trading strategy.
Secondly, traders should not do things that do not create value, nor should they do things that are very time-consuming. For example, observing time periods, price movements, and capturing trading signals without preparation; always staring at their own trading orders; looking for better trading methods in forums; arguing with other traders on social media; staring at the screen and overtrading, etc.
Overtrading VS Set and ForgetOvertrading is the Achilles' heel of most traders. In overtrading, there are many common situations. For example, constantly staring at orders; switching to a smaller time frame during trading; looking for information unrelated to the trading system from some social media, forums, or news websites to confirm the correctness of the trade; constantly changing stop-loss positions and profit targets; opening or closing positions without a plan; spending too much time checking some closed orders, etc.
The "set and forget" method is completely opposite to overtrading. When you have completed the relevant analysis and established a position, set the stop-loss position and profit target, and then you don't have to worry about it anymore. You don't need to pay attention to how the price changes, just wait for the price to reach your profit target or stop-loss position. In this way, you no longer need to manually manage trades frequently.
In fact, using the "set and forget" method can improve trading skills. Moreover, when traders stop overtrading, their trading performance has improved. Traders find it difficult to change the bad habit of overtrading mainly because they do not believe in their trading system. These traders only consider making money, and have not verified the advantages of the trading system, nor do they have any trading rules.
Boredom and poor decision-making in trading
In trading, only when you know what you are looking for can watching the market be a good thing. But the market fluctuates unpredictably, and it is difficult for us to know what will happen next. If we just browse the time frame and catch trading signals, it is doomed to fail.
When traders watch the market for a long time, they will feel bored to some extent. Boredom is a dangerous emotion, which can easily lead to poor trading decisions. To establish a better trading workflow and eliminate boredom, you can start by analyzing the market and making a trading plan every Sunday, determining the important price levels for the coming week.
Next, traders should set price alerts at important price levels. After that, traders should not pay attention to the market, and when the price reaches the alert level, or the price alert goes off, they can check the chart and assess whether they should enter the trade. In summary, in order not to interfere with trading, you can use the "set and forget" method for trading.
Control the desire for trading
Understanding the prerequisites for using the trading system, and knowing when it has advantages and when it does not, is one of the prerequisites for doing well in trading. Traders must be good at choosing, and only when the system tells you that you can enter the market, can you enter. In fact, sticking to one focused trade a week can also be very successful.
Trading is a pattern recognition game, it is a scanning process, and once you enter the trade, you cannot redo it, so traders need to minimize the possibility of making mistakes. Therefore, before preparing for a potential trade, you can first make a checklist based on past experiences. This can prevent you from forgetting some details, make your decisions clearer, and better grasp yourself.In addition, traders should prioritize events and stop over-trading. When the market environment is very complex, staying away from the market is actually one of the key factors for outstanding performance. Traders should understand that "less trading is better trading," in other words, not trading is more important than trading.
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