by The Brush on February 12th, 2013

Binary options trading can be so exciting to new traders that they will search for reasons to place a trade. Sure, that might sound rational off the top, but in reality, good trade setups that are worth taking generally have a way of standing out. As long as you’re following your method, paying attention, and properly doing research or setting up your indicators, you will usually spot “A trades” without much thought. If you find yourself hunting for reasons or justifications to place trades, you may be overtrading.

How Many Trades a Day is Too Many?

It’s very common for newbie traders to think that overtrading is something which is measured in terms of volume or frequency. This is not really the heart of the matter however, since volume and frequency are both very subjective, and depend on your trading style and your methodology. Some trading methods will produce a couple good trades a month, while others may present a number of good trades a day. Some methods will work very well on one and only one asset, while being somewhat less effective on others. Other methods will be pretty effective across a broader class of assets.

You shouldn’t necessarily gauge the usefulness of your trading system by how many trades a day/week/month that system generates. Yes, it is great to be able to place a lot of trades. But they really have to be good trades. A high win percentage is more important. What’s also more important is that your average win outweighs your average loss. There’s no one magical statistic that will determine success. You actually need a combination of good statistics to have a profitable system.

Is there anything wrong with placing a dozen trades a day? Not if your methodology honestly generates that many great trade set-ups, and not if you truly are not overwhelmed with that kind of trading. Is it a problem if you’re holding multiple positions at once? Again, not if it suits your trading personality and your trading method tells you those are all great trades. And of course, your bankroll needs to be large enough that you can manage those multiple trades. Check out these trading rules for more guidance on making good decisions while trading.

With that in mind, there is a tendency for newbies to overexert themselves by placing too many trades. The reason the trades are too many aren’t that lots of trades are bad as a general proposition. It is a problem when those trades aren’t all “A trades,” and when they are more than the trader can keep up with psychologically in such a brief time period.

Examples of Over-trading

www.binarytrading.org/balancing-options-trading-with-life/ before becoming a tradeaholic.

Here, on the other hand, is an example of someone who may appear to be overtrading, but really is not:

• Betty has been trading binary options for a year, and has decided to do some faster trades now that she feels comfortable. She discovers she has an easier time psychologically with trades she is not in for very long, and has no problem managing a dozen trades a day. Her methodology tells her these are all “A trades.” Betty is profitable and enjoys her trading. Click here for the Top Ten Benefits of Trading Binary Options.

The Danger of Undertrading

Just as there is such a thing as over-trading, there is also such a thing as under-trading. Impatience typically drives traders to enter into more trades than they can handle or should be in. But there are also emotions which can drive under-trading, like low self esteem, falling confidence, and skittishness from past losses. If you have had a number of bad trades, even if they are statistically predicted by your backtesting, you may start to feel unsure of yourself and distrustful of your method, which may cause you to skip good trade set-ups or close early in trades you should stay in. What is backtesting? Find out here.

Under-trading may not sound as damaging as over-trading, and you will not hear as many discussions about it. It can be every bit as detrimental. What happens when you start under-trading is that your method becomes less effective. Since you skip out on trades you miss opportunities to profit. Dont miss profitable opporunities learn how much trading is too much.