“Money is made by SITTING. Not TRADING”.- Jesse Livermore, Reminiscences of a Stock Operator. One of the biggest reasons 90%+ traders fail is because they overtrade, and think they need to be in everything that moves. Here are 5 things that you can do to prevent overtrading and eliminate boredom trades.
Always Remember: Being Flat Is Better Than Red
Put this message on a sticky note by your trading monitors. Constantly reminding yourself to not take stupid trades that are not “A” quality. Remember trading is a game where it's about survival, and a big aspect of growing your trading account is not taking unnecessary losses. Check out this video to learn more about patience in trading:
Review The Daily Charts of Your Best Trades Constantly
Knowing the daily charts of your best trades will give you the patience to wait for the best setups. Knowing exactly what to wait for will help you narrow your focus away from subpar setups. Knowing what setups bring you success and seeing the same thing over and over again will eliminate your need to deviate from what makes you profitable.
Walk Away From Your Computer
Overtrading almost always stems from you being too emotional. Stepping away from your trading computer will help you settle down, relax, and focus.
Set A Daily Max Loss
Daily max losses are essential for day traders. Without them, it is possible to lose a huge portion of your account in a day. Once you lose a certain amount of money per day (ideally no more than 2% of your account), you should get your account locked by your broker. This will prevent you from revenge trading in an attempt to make it all back. Learn more about how to use a daily max loss in this article.
Write Out Your Trading Plan Before Entering
Writing out your trading plan will help you evaluate the quality of the setup. Write out the type of the setup, why you're looking to take it, how much you're risking, your entry price, your stop loss, and your profit targets. Doing this will make you realize when you're taking a sub-par setup. There will be less of those trades where you're just trading for the sake of doing something.
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