Psychology lesson: Over trading / under trading.

As you may know by now, I aim to place between 1 to 3 trades per week. How did I arrive at that number? It was something that happened naturally as the strategy evolved overtime. Most of my trades are placed on a 1hr chart, they can take anywhere between 1 to 36 hours to complete, with an average completion time of 16 hours. Then, considering the fact I only have 1 trade on at any given time (due to only holding a certain amount of financial risk at any given moment, which ensures the system is mathematically sound). I visit the charts 1 to 3 times per day to see if there is an opportunity. On average, I place a trade once in every three visits (sticking to the golden rule of: only placing a trade when I can comfortably say "even if this trade stops out, I would still say I should have taken it").

All this has naturally led me to an average of about 3 trades per week, very occasionally 4 or sometimes 1. My current long term average is 2.5.

But this wasn't always the case, I was once an 'over trader' I would comfortably place at least 10 trades a week, sometimes 15 or more.

I realise 'over trading' is subjective, but in accordance with they way I trade (taking advantage of a fundamental cause on a 1hr time frame) with an average completion time of 16 hours...even if you're glued to the charts all day, there just aren't enough hours in a week to place more than a maximum of maybe 6 to 8 trades.

I believe the greatest cause of 'over trading' is a desperation to win the trade you are placing, combined with unrealistic financial goals. Speaking from experience, even when I knew I could be lose half of my trades and make money. I still couldn't accept losing trades. If a trade stopped out, I just couldn't believe it and would place another one straight away. Then another one, and all of a sudden I've got 3 losing trades rather than one. Which inevitably leads to even more 'irrational decisions'.

How did I overcome 'over trading' ? Honestly, it was difficult. It's a case of somehow finding peace with the original decision you made. And then accepting the outcome of that decision.

Personally, I find peace by first of all acquiring enough knowledge of 'the market' to be comfortable making a decision in the first place. Then once I have the knowledge, make a decision I would stand by tomorrow regardless of the outcome.

Unfortunately, there isn't a metric I can give you to define 'peace with your decision'. It's something only you can define. Ultimately, your definition may be different to mine, but what I can say is, once you find your own: I would take this trade regardless of the outcome- 'moment'. Over a long period of time, ultimately, the results will work in your favour.

Under trading: having never been an 'under trader' I'm not an authority on the subject . But essentially, rather than chasing winners, you are too worried about losing. Which results in missed opportunities. But if you can accept a risk must be taken to make money, the fundamental cure remains the same:

Acquire enough knowledge to make a decision.

Wait for the moment you can say ' I would still place this trade even if it stops out'

Take the trade.

Then if the trade does stop out, you can deem it: 'A happy loser'.

It takes diligence to ensure every decision you made would be a 'decision you'd make tomorrow regardless of the outcome'...if you can genuinely do it for 3 months, you'll be amazed with the results.

Feel free to get in touch. Every question is relevant: johnelfedforexblog@gmail.com