Overtrading in forex is the act of opening too many positions or too often. What is used as a standard here is not the amount, but your discipline towards the trading plan.

When you open positions more often than usual, dare to increase the size of your trade for no valid reason, and completely ignore safe trading methods, that's when you are said to be overtrading.

Overtrading is a term that has been around for a long time and was first known in stock trading. Because the world of forex trading is also not free from the risk of overtrading, this name is then used to describe the actions of forex traders who open too many positions.

Causes and Effects of Overtrading in Forex

Overtrading is caused by 2 trading emotions, namely greed and revenge. When they see price movements are profitable, greedy traders often add positions or increase the size of the trade to maximize profit potential.

Because they are already filled with lust, they do not check the signal confirmation or carry out further analysis before adding to the position. The concept of safe trading was abandoned in pursuit of profit in sight.

When soon the price changes direction and the trader's losses are multiplied due to extra positions being opened spontaneously, then all that remains is regret.

The desire for revenge can also trigger an overtrading in forex. This intention begins with a defeat that traders are not ready to accept.

He felt that the loss he suffered was unreasonable because he had entered based on the signal he thought was the best. In addition, the large loss he bears pushed him to re-enter in order to compensate for previous losses.

Because he didn't realize his mistake, he didn't do any evaluation to practice safe trading methods. When the next time he loses again, then the revenge action that he takes is not covering the loss, but in fact increasing the loss.

Avoiding the Danger of Overtrading

Believe it or not, the signs of overtrading are experienced by traders of all levels. What distinguishes whether a trader is amateur or professional is his agility in recognizing, acknowledging and recovering from the effects of overtrading.

If you want to behave like a pro trader, try your best to understand the risks of overtrading. Here are two tips from the best forex broker to avoid overtrading:

1. Develop a Trading Plan And Apply It With Discipline

This is is the first thing that can keep you from overtrading. In fact, overtrading is almost always caused by impulsive actions that are often carried out by traders without a trading plan.

However, even those who already have a trading plan are not 100% safe, because there are still potential deviations that need to be watched out for. That is why, having a trading plan alone is not enough to protect yourself from overtrading.

You must have a commitment to implement the plan with discipline because overtrading in forex is always rooted in deviations from previously established rules.

2. Think And Be Realistic

To avoid overtrading caused by revenge, start thinking and be realistic. Don't reject the potential loss outright, but accept and anticipate the possibility as well as possible and learn about trading with Didimax forex broker.

Forex isn’t something that can be predicted with certainty. Where there is an opportunity for success, the potential for failure will always accompany. Win or lose, profit or loss are normal scenarios that can occur in forex trading.

It's unrealistic to expect you to always win and keep making profits, because even the most professional traders have experienced losses.

In this case, take advantage of the knowledge of risk management that was created to help traders minimize the chance of loss, so that they can carry out safe trading strategies. This can also prevent you from overtrading in forex.