Over-
trading
1
⚠️ Why It's Dangerous
Overtrading is one of the fastest ways to drain your account. Each trade has costs (spreads, fees, slippage), and more trades don't mean more profits—they often mean more losses.
The Psychology: Traders often overtrade due to:
- • Boredom — "I need to be in a trade"
- • Recency bias — "That last win was easy, let's do another"
- • Loss recovery — "I need to make back what I lost"
- • FOMO — "The market is moving, I'm missing out!"
✅ How to Avoid It
- Set a maximum number of trades per day (e.g., 3-5 max)
- Only trade your A+ setups that meet ALL your criteria
- Take breaks after wins AND losses
- Keep a trading journal to track trade frequency
- Remember: No trade is also a position
Account Balance: Overtrader vs. Patient Trader
2
⚠️ Why It's Dangerous
"The market will come back" is the most expensive sentence in trading. One trade without a stop loss can erase months of gains—or your entire account.
Real Impact:
- • A -50% loss requires a +100% gain to break even
- • A -80% loss requires a +400% gain to break even
- • Unlimited downside = unlimited stress
✅ How to Avoid It
- ALWAYS define your stop loss BEFORE entering
- Use technical levels for placement (support/resistance)
- Never risk more than 1-2% per trade
- Use automatic stop orders, not mental stops
- Accept that losses are part of trading
Recovery Required After Loss
0%
Account at Risk
3
⚠️ Why It's Dangerous
By the time you see the move on Twitter or Discord, it's usually too late. FOMO entries typically have:
- • Poor risk:reward (chasing extended moves)
- • No clear invalidation level
- • Emotional decision-making, not planned
- • Often catching the top/bottom of reversals
✅ How to Avoid It
- Remember: There's ALWAYS another trade
- Stick to your pre-planned watchlist
- If you didn't plan it, don't trade it
- Use limit orders at predetermined levels
- Mute social media during trading hours
FOMO Entry vs. Planned Entry
Emotional State Tracker
4
⚠️ Why It's Dangerous
Revenge trading compounds losses at an alarming rate. The emotional spiral typically looks like:
- 1. Take a loss → Feel angry/frustrated
- 2. Enter larger position to "make it back quick"
- 3. Ignore your trading plan
- 4. Bigger loss → More frustration
- 5. Repeat until account is destroyed
✅ How to Avoid It
- Set a daily loss limit (e.g., 3% of account)
- Take a mandatory break after losses
- REDUCE position size after losses, not increase
- Review your trading plan before each trade
- Remember: The market will be there tomorrow
The Revenge Trading Death Spiral
😤
Initial Loss: -₱5,000
"This is BS, I was right!"
🎰
Revenge Trade 1: -₱10,000
"Double position to make it back"
😱
Revenge Trade 2: -₱20,000
"All-in to recover everything"
💀
Account Blown: -₱35,000
Started with -₱5k, ended with -₱35k
5
⚠️ Why It's Dangerous
Leverage is a double-edged sword. While 50x or 100x leverage sounds exciting, a small move against you can wipe out your position—or your entire account.
The Math:
- • At 10x leverage: 10% move = 100% loss
- • At 50x leverage: 2% move = 100% loss
- • At 100x leverage: 1% move = 100% loss
✅ How to Avoid It
- Keep effective leverage below 10x (preferably 3-5x)
- Calculate position size based on risk, not greed
- Use the 1-2% rule: Never risk more than 2% per trade
- Understand that higher leverage ≠ higher profits
- Professional traders often use lower leverage than retail
Your Account at Different Leverage Levels
10x Leverage
100% of account at risk
Your Capital
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Liquidated
6
⚠️ Why It's Dangerous
Hidden costs silently eat your profits. What looks like a 2% gain on paper might be only 1% after costs—or even a loss.
The Silent Killers:
- • Spreads: Immediate loss on every trade
- • Trading fees: Entry + exit costs
- • Slippage: Getting filled at worse prices
- • Funding rates: Holding costs in futures
✅ How to Avoid It
- Calculate total round-trip cost before entering
- Only take trades where profit target > 3x costs
- Use limit orders to reduce slippage
- Trade during high-liquidity hours for tighter spreads
- Track your actual execution prices vs. expected
Profit Erosion from Costs (100 trades)
66% of profits lost to execution costs!
7
⚠️ Why It's Dangerous
Low liquidity = higher costs and worse fills. What might be a tight trade during peak hours becomes expensive and slippy during off-hours.
Signs of Low Liquidity:
- • Wide bid-ask spreads
- • Thin order book (small sizes at each level)
- • Price gaps and erratic moves
- • Difficulty filling orders at expected prices
✅ How to Avoid It
- Check spreads before entering any trade
- Trade during overlap sessions (8PM-12AM PHT for Forex)
- Avoid trading around major holidays
- Use limit orders in thin markets
- Reduce position size during low-volume periods
Spread Comparison by Session
✅ High Liquidity (London-NY Overlap)
⚠️ Medium Liquidity (Asian Session)
❌ Low Liquidity (Weekend/Holiday)
8
⚠️ Why It's Dangerous
Without a plan, you're not trading—you're gambling. Every decision becomes emotional rather than systematic.
A Trading Plan Answers:
- • What setups will I trade?
- • How much will I risk per trade?
- • Where will I enter? Where will I exit?
- • What is my maximum daily loss?
- • When will I NOT trade?
✅ How to Avoid It
- Write down your trading plan BEFORE you start
- Include entry criteria, exit rules, position sizing
- Review your plan daily before trading
- Track adherence in your trading journal
- Update plan based on what you learn, not emotions
With Plan vs. Without Plan (Win Rate)
With Trading Plan
55%
45%
Expected: +12% annually
Without Trading Plan
35%
65%
Expected: -25% annually
Quick Knowledge Check
Test your understanding of common trading mistakes
Question 1 of 5
📚 Key Takeaways
Summary: Your Defense Playbook
Remember these principles to protect your trading capital
Risk Management
- Always use stop losses—no exceptions
- Never risk more than 1-2% per trade
- Keep leverage under control (3-5x max)
- Set daily loss limits and honor them
Psychology
- Take breaks after wins AND losses
- Never revenge trade—walk away
- FOMO = bad entries, always
- The market will be there tomorrow
Execution
- Have a written trading plan
- Calculate costs before trading
- Trade during high-liquidity hours
- Quality over quantity—fewer, better trades
Continuous Improvement
- Keep a detailed trading journal
- Review your mistakes weekly
- Update your plan based on data
- Practice on demo before going live
Pre-Trade Checklist
Run through this before every trade
Is this trade in my plan, or am I chasing?
Have I set my stop loss BEFORE entering?
Am I risking less than 2% of my account?
Is the risk:reward ratio at least 1:2?
Am I trading during a high-liquidity session?
Have I checked the spread and calculated costs?
Am I emotionally calm (not revenge trading)?
Will I still be okay if this trade loses?
⚠️
Important Disclaimer
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This material is for educational purposes only
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Trading involves significant risk of loss
🧪
Always practice on demo accounts first
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Never trade money you can't afford to lose
👨⚖️
Consult a licensed financial advisor
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Past performance doesn't guarantee future results