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Trading Basics Forex Futures September Trading Insights

The One Thing You Need to Know to Stop Overtrading

Overtrading. It's one thing that has killed more trading accounts than nearly any other trading vice. That's because as much as we want there to be, there is just not an opportunity in the market every minute of every 24-hour trading day.

And when we are constantly in a trading position, we are taking low probability trades and hurting our equity curve. Then, when a real trading opportunity arises, we're not in the best cash position to take advantage. 

But what if there was one thing that could cause you to flip the switch on overtrading once and for all? This may be it. 


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This is a continuation of our month-long series on how to get better trading every day. For complete access to this series, go to https://blog.topsteptrader.com/topic/september-trading-insights.

Cash is a position.

We overtrade because we love the action. And we don't want to miss out on a move in the market. It's one of the traits that moves trading closer to gambling. Why? Because when we're constantly in a position, our odds of the market moving in our favor are 50/50. We don't have an edge. We are just trading. 

Realizing that cash is a position means that you realize that it is an asset to be deployed at the best opportunity. That changes the question from, "Do I want to be long or short this market?" to "Do I want to be long this market, short this market, or in cash?" 

Cash is an opportunity. It's the idea that even if we are right about the market, timing matters. It's realizing that where the market is trading right here, right now may not be the best entry point.

But if we view trading as a binary decision (between being long the market or short the market), then we am forcing ourselves to make a false choice. "I want to be long Crude Oil ($CL) because it's going higher!" I declare. But is it going higher from here?

If, instead, we view cash as a position, then we can ask ourselves if we want to be long Crude Oil right here. And changing how we frame the question can make the difference between continuing down the same path and eliminating overtrading. 

Posted by TopstepTrader on September 05, 2018

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