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Trading Education Posted by Team Topstep June 21, 2022

Overcoming the Impulse to Overtrade

Stock Market Charts

Here are two scenarios that I believe most of us have encountered. First, it’s a volatile trading day; the markets are moving quickly, and chart patterns are setting up fast. We start to act on these patterns. However, they quickly erode; in the fast-moving market, we continue to find ourselves impulsively looking for the next setup. Eventually, our minds cannot keep pace with the market, and we find ourselves trading without thinking. Before we know it, we’ve severely overtraded, which almost always suggests a losing session. 

I know one trader this happened to. He used to make about five trades a day in his market, totaling about ten contracts. However, on this particular day, his total volume amounted to about 200 contracts. Remarkably, this guy broke even on his trades, but after commissions and exchange fees, he still lost more than $500, or 5% of his account value.

Here is an alternate scenario. The market is slow. Eventually, you become tired of waiting, and instead, you begin to pick entries aggressively. Because the market is slow, choppy, and grinding, you believe you can exhibit greater control. However, after a losing trade, you continue to re-enter, perhaps looking for a breakout pattern that will never come. In this case, the slowly developing day helped generate unfavorable personal behavior, and you overtraded in a market that was going nowhere. 

There are countless other ways that any of us can, and have, overtraded. When it happens, you know that the likely outcome is that you’ll lose money on the day. Furthermore, your balance gets eaten up by commissions and fees. The other relevant side effect of overtrading isn’t just that your financial capital is tied up, but also that you exhaust your psychological capital as mental and emotional fatigue sets in. 

Why Do We Overtrade?

Today, we will examine some factors contributing to overtrading and, equally as important, how you can counter the urge to do too much. 

Sun Tzu says: “The warrior who knows their enemy and their self need not fear the outcome of 1,000 battles.” I believe this statement is adaptable to trading, meaning that if you know your market and yourself, you don’t have to fear the outcome of your trading. 

The more challenging element to master is knowing oneself or being self-aware. This is a critical component of controlling your overtrading. However, it is challenging to master since it can be difficult for us to critique ourselves accurately. 

Not only does ego frequently get in the way, but also our bias makes objectivity an obstacle. This is why it’s helpful to read posts like this one. This is not only because my words are entirely relatable but because this blog creates a conversation partner for you, enabling you to reflect. Additionally, having a trading community around you is essential; it gives you an outlet where you can offer support to others while also having friends who can support your goals with wise and unbiased feedback. 

For now, I’ll be your friend. If you have issues with overtrading, then let’s examine some culprits of your mental environment and see if any of these factors relate to you. 

Fear of Missing Out

This cause is connected to impatience, which I will further address. However, this category deserves its own treatment. In times of high volatility, it appears that making money is easy, so it feels like we are missing out if we aren’t taking advantage of the swings. 

Or, in slow markets, we convince ourselves that it will be too late if we don’t jump in now. Then, when we are trading out of the fear of anything, we let emotions control our trading. Once that occurs, then as our emotions evolve, so do our risky behavior and impulses.

Revenge Trading

This idea is connected to the previous one. When we start exhibiting risky behavior, we subsequently engage in other undisciplined facets. What often prompts overtrading is getting stopped out of a trade, only to reassess, thinking we should have just stayed in. Because we are trading on the fear of missing out, we will jump back in and most often be disappointed again. This cycle can repeat throughout the day. 

I’m Overdue

The previous element feeds into a gambling mindset that reasons that after multiple losers, I’m destined to have one trade go correctly, and if I miss out on that winner, then all my efforts have been in vain. At this point, traders are being trapped by further mind games that serve to hinder their recovery.

Instead of working out as we convince ourselves it should, this thinking generally prompts more significant losses. Like every broke gambler, every trader who blows up an account believes they are overdue for a big turnaround. But, unfortunately, it just doesn’t automatically work that way. 

The Multiple Triggered Trap

Okay, sometimes it’s not the psychological letdown that leads to overtrading; at times, it’s an issue with our technical system. For example, in high volatility, we may have several trading signals that usually serve us well, but that lead to disaster in a particular instance. Or, in a super slow environment, our systems may signal, but without any momentum for it to carry through. So again, this is an example of knowing when to stick to our programs and when to modify our entry criteria in order to avoid taking too many trades in the wrong environment. 

The “I Think” Impatient Game

This is another feature of overtrading. But, again, it results from impatience and a lack of discipline. Our signals may be wrong, but sometimes we don’t do ourselves any favors by front-running our own charts and asserting what we think will happen.

How many times have you entered a trade assuming a formation would last? However, the entry criteria then crumbled at the last minute, but you had already entered a trade based not on what happened but on what you thought would happen. This results from becoming so impatient that we won’t let markets set up around us. This will lead to more trading than is healthy, especially in very fast or slow-moving markets.

Always Looking For A Reason

We’ve all encountered a specific dilemma over the course of our trading formation. This is that you grow tired of sitting on your hands waiting for a trade to signal. Eventually, you want in a market so bad that you begin to look for reasons to trade. The result is that we are prone to inventing reasons to trade. Accordingly, when we look for reasons that are not clearly evident, we not only take less than our best trades, but we also set ourselves up to overtrade. 

Lack of a Fine-Tuned Approach

In varying ways, each of these seven crucial issues overlaps, including the last one. However, most of these are psychological responses to trading obstacles. This final consideration will be a matter that prompts mental and emotional disintegration. When you lack a fine-tuned, tested plan, you are far more susceptible to a breakdown leading to overtrading. Alternatively, when you adopt a tried and true method, you will be more confident in sticking to your plan.

What next?

So what do you do when you find yourself continually trading with bad habits, especially overtrading?

The first thing to do is stop! My first boss used to say the first thing you do when you find yourself in a hole is to quit digging, and how true that simple but profound advice is. If you are overtrading, it’s best to stop trading altogether and reset instead of continuing what you are doing. 

The following items will include other ways that you may compensate for the vulnerability of overtrading.

Walk Away Rule

Yes, it’s challenging to walk away. Always, you’ll miss opportunities. However, one thing you can quickly do to help eradicate a tendency to overtrade is to create a rule to walk away between trades. Maybe it will be time-based, such as leaving for five minutes, or perhaps it will be event-based such as doing twenty pushups or other things that give you time to process your previous trade and reset your mind. 


On days that have very slow or unusually fast price action, your standard signals may not be as reliable, so the key is to adapt your system. There may be ways to recognize before the session opens that it will offer less favorable price action. If not identifiable in pre-market, other instances early in the session often give these types of indications. Early adjustments to your model can help ensure you don’t waste trades. 

Remove Emotion and Do Less Thinking

There’s no way to remove thought and emotion from trading entirely, but there are ways to temper these facets. One way is to become programmatic in your entries, thereby eliminating many of the discretionary elements from your trading. 

Furthermore, you can automate trade entries and exits, and even if you do so manually, you can let your platform carry out the remainder of the risk management. This will remove you from making as many active, real-time decisions. Furthermore, you may even be able to multitask; you can exercise or do any number of productive things while your platform generates your signals. This will distance you from the various mind games that we play discussed in the previous section.

If overtrading affects you, then these are some items you may consider reflecting upon to help sharpen your trading habits and discipline. There are a host of other elements worthy of conversation, so I invite you to engage in the discussion in the Topstep community. 

The concepts in this article are general, as each trader is unique. Therefore, it will be up to you to employ these ideas in a way that connects with your strengths and growing edges as a trader.

Until next time, trade well!