Overtrading

Overtrading – Overtrading is the compulsion to execute too many trades, often beyond a plan’s criteria. This behavior can stem from boredom, FOMO, or the illusion of quick profit. Overtrading increases transaction costs and risk. A disciplined approach fixes a maximum number of trades per day; deviation indicates bias. For example, taking 15+ trades when the plan calls for 3–5 is classic overtrading. It reflects emotional impatience or greed rather than analytical strategy. In an automated setting, overtrading might occur if a strategy’s signals are too sensitive, so parameters should enforce cooldown periods or maximum orders per period. The risk of overtrading underlines the need for strict trade-count limits and adherence to the original strategy as advised by trading discipline rules.

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