Over-trading (opening too many trading positions) is usually caused by emotional trading. Usually, this is done by forex traders, especially novice traders who have not much trading experience.
Those whose trading results are inconsistent and tend to experience loss often have over trading without realizing it.
Example of Over-Trading
For example, a trader has agreed to trade only on the Daily chart. He tries to look at market conditions at a lower time frame, for example, a 15-minute chart and finds opportunities to open positions. Due to a lack of understanding of trading methods on the daily chart such as the price action method, the trader then tends to always use a low time frame (below the Daily).
Low time frames such as M10 or M15 provide many entry opportunities, but the probability is low.
Another example, when a trader has just made a profit he tends to open a position again due to excessive self-confidence or experiencing post-profit euphoria.
Prevent Over Trading By Making a Trading Plan
Emotional factors often greatly affect the way we trade. Morever, it is relatively difficult to track. You must fight these emotions by making plans and trading strategies outside trading hours.
According Investopedia, you must make trading plans and strategies before entering the market. Additionally, you must implement it correctly and patiently, and without emotional involvement.
Thus, we can avoid the habit of over trading while increasing the quality of each trading position made.
Preventing Over Trading With Price Action Method
How to trade by applying the correct price action method will prevent us from over trading, because we know exactly what we are looking for in price movements in every market condition. We will only enter the market if the price action setup is valid.
Read more: The Importance of a Forex Trading Plan