Overtrading? Taking ‘a breather’ between trades

Published on: May 23, 2023

One of the most common issues that traders face at some point in their careers is going completely off-plan and putting in a succession of off-plan trades, with disastrous results to their account – be it SIM, a trader tryout account, or a live account. It’s classic overtrading and is something you can overcome. 

The typical pattern would be a trader that is trading 3 or 4 trades a day, then put in a massive losing day over-trading with 45 trades. We see it all the time. It’s one of the most common issues traders have to overcome.

There’s a reason for this behavior. As losses mount, the brain goes into “panic mode”, much the same as it would if you saw a tiger walking up to you in the street. Lower parts of the brain kick in and take over your decision-making process. After all, if you saw a tiger in the street, you wouldn’t weigh up the pros and cons of diving into the shop doorway to your right. The limbic system takes over, and you end up in reactive mode, much like you do when you start madly trading off plan and overtrading.

One simple approach to preventing this is to take a breather between trades. This can take many forms, but they all have the same rationale – to bring you back down to earth and put the limbic system back in its rightful place. Now – taking a breather means just that – it means a short period where you do not trade and do not look for a trade. What pops into mind for most at this suggestion is “But I’ll possibly miss a trade if I do that”. But how many opportunities per day is the market presenting to you? Is it so likely that after 1 trade, you immediately get a perfect setup for another? Even if that were true – if you are falling into the trap of massively overtrading, you are better off taking steps to avoid that, than getting the next trade.

The idea behind this is to not let the limbic system take over, to shift your focus to something else for a brief period, so your mind exits that “fight or flight” mode it keeps getting into.

So what constitutes taking a break? Well – here are some suggestions:

• Journal your trades after taking them – not only is this good practice, but it also allows you time for introspection, to observe your last trade rationally before you consider taking the next. This makes it much less likely that your next trade will be a revenge trade.
• Go fetch a glass of water. Even if you have a full glass, go and get one anyway. It’s just a way to disengage.
• Have a quick chat with someone else in the house – not about trading but just say “Hi, I’m taking a quick break, how are you doing?”.
• Do some quick stretching exercises – not a full routine but no less than a minute, this also has the benefit of making up for all the time you have sitting down.

What I wouldn’t advise, is getting onto Facebook or other social media because you are likely to come across trading-related posts that might actually take your focus away too much.

Taking a breather is very simple. It may seem too simple, but then it’s a specific “trick” for a specific issue – one of chronic overtrading when things appear not to be going that well. If that’s you, try it out – you’ll be surprised how much it helps.