Foreign Exchange Comparison of Under and Overtrading

When new traders learn about trading successfully they are told to avoid overtrading.  However, it is just as important that a trader not under trade.  It is important that you know when you are overtrading and when you are under trading.  The best way to determine whether you are dong either of these things is to complete a foreign exchange comparison of under and overtrading.

Starting a Foreign Exchange Comparison of Under and Overtrading

When you try to find out whether you are under or overtrading you have to know where to start.  The best place to start is to look at your trading style and the trades that you have completed.  This is the best place to start in your foreign exchange comparison.  You should also look at when you have completed your trades.  This is something you can get from reports given to you by your forex broker.

The first thing to look at is your trading style.  Some trading styles require more trades to be completed in order to be profitable.  These trading styles are generally the more short-term and medium term trading styles.  You have to consider how many trades need to be opening for you trading style and strategy to be profitable.  Some scalpers will complete hundreds of trades in a day and this is not considered overtrading.

The number of trades you have completed should also be considered.  Many traders do not count open trades as part of their under or overtrading calculation.  This may not be a good idea because open trades can be an indicator of overtrading.  When you overtrade you are not able to keep track of all your trades which lead to multiple open trades.

The time period you have completed all your trades in should be considered.  It is possible to identify overtrading by the length of the trading timeframe.  If you are trading for very long hours and consistently placing and closing trades throughout this period of time then you may be overtrading.  However, if you have a long timeframe where very few trades have been placed and completed then you could be under trading.

Identifying What You are Doing

It is important that you find out whether you are under or overtrading.  A lot of expert traders’ state that under trading is much easier to identify.  Most under traders can identify what they are doing by looking at the trades they have completed and what their trading plan states.  If the trading plan said that they should have entered a trade at a certain point and they didn’t it is likely that they are under trading.

Overtrading is often harder to identify because of the number of trades needed for certain strategies.  The easiest way to figure out if you are overtrading is to look at your trading schedule.  If you are trading outside of the times you should be then you are likely to be overtrading.  If you are only making small profits through a number of trades then this could also be a sign of overtrading.

Once you have identified what you are doing you need to take steps to rectify this.  The best way to do this is to create a trading plan that you are able to stick to.  This will stop you from under and overtrading because it sets rules down for you to follow.