Overtrading: what it is, the signs, and how to stop

Overtrading is taking more trades than your plan allows, or more size than your plan allows. It isn't about a number. Ten trades can be fine for a scalper with a plan for ten. Three can be overtrading for someone whose plan has one setup that shows up once a day.

It comes in a few shapes:

• Too many trades. Trade four, five and six on a day your plan said three at most.
• Trades outside your hours. Lunchtime chop, the last hour, the overnight session you said you don't trade.
• Trades outside your setups. Taking something because it moved, not because it's one of the setups you wrote down.
• Trading after you're done. You hit your target or your daily stop and kept going.
• Too much size. Doubling up because you're sure, or to make the day back. That's overtrading in size.

Revenge trading is one kind of overtrading, the kind set off by a loss. It has its own guide. This page is about the wider habit, including the trades you take on a calm, boring day.

• Your first one or two trades of the day make money and the rest give it back.
• You can't say which setup a trade was, only that "it looked good".
• Your best weeks have the fewest trades.
• You're trading in hours you'd call slow or choppy if you looked at them afterwards.
• Commissions are a noticeable part of your losses.
• You feel you need to be in a trade to be working.

• Boredom. Waiting is the job, but it doesn't feel like it. Sitting in front of a chart for two hours without clicking feels like wasting the morning, so you click.
• A daily dollar target. If you need $300 today, a quiet day becomes a problem to fix, and you fix it with trades your plan never had.
• A loss to win back. That's revenge trading, and it usually comes with bigger size.
• A good start. After two winners you feel sharp and take a third that's only half a setup.
• Fear of missing out. A move without you feels like a loss, so you chase the next one. FOMO trading has its own guide.
• No written plan. If nothing says which trades you take, every trade is allowed.

The best-known study on this is Brad Barber and Terrance Odean's "Trading Is Hazardous to Your Wealth". They looked at 66,465 households with accounts at a large discount broker from 1991 to 1996. The households that traded the most earned 11.4% a year, against 17.9% for the market (abstract on Odean's Berkeley page). Those were stock investors, not day traders, but the pattern is the same one I see in journals: the more trades, the more of the edge goes to costs and to trades that were never good.

Your own numbers say more than any study. Split your trades by trade number of the day and add up each one. Here's a made-up month that shows the shape I look for:

This trader is profitable for two trades a day and gives back $640 after that. Their real edge is $1,200 a month and they keep about half of it. The fix is a max of two trades a day, not a better strategy.

Willpower won't do it, because the extra trade always feels justified in the moment. Make the decision before the open and write it down. These are the rules that work against overtrading:

• Write the day's plan before the open, with the two or three scenarios you're waiting for. If price does something that isn't on the page, you don't have a trade. The trading plan template has a daily page for this.
• Count your trades where you can see them. A sticky note on the screen with a tick for each trade works.
• When you're done, close the platform. Not minimised, closed.
• Make waiting easier. Set price alerts at your levels and step away from the screen until one fires.

• Take the last two or three months of trades.
• Number each trade by its order in the day: 1st, 2nd, 3rd and so on.
• Add up the P&L and count the trades for each number.
• Find the first number where the total turns negative and stays there. Your max is the number before it.
• If the totals are positive all the way down, your problem isn't the number of trades. Look at size or at which setups lose.

Then check it the same way every month. A max trades rule only works if it comes from your own numbers. A rule you picked because it sounded right gets argued with by trade three.

This is the kind of habit I built Actal to make visible. Stats has a "Trade number of the day" table that does the count above for you from your imported trades, and tells you in a sentence when your later trades lose what your early ones made.

You can set a max trades per day rule and a trading window, and every trade you import is checked against them. A fourth trade on a three-trade day shows up as "Overtraded", with what it cost. Overtrading is also one of the starter mistakes you can tag in the review, with a running dollar total, and if it's your most expensive mistake it becomes your focus for the week. It's free while in beta.

Some traders fix overtrading with one rule. Others know their number and still take the fifth trade, because the habit is about boredom or the need to be busy, not about the plan. That's usually easier to see from the outside. The free trading diagnostic on the academy site asks 31 questions across seven areas of your trading and names the one to fix first.

I'm Joakim. I trade index futures full time and coach traders one-on-one at Jusell Trading Academy. Actal is my product, so weigh that, but the method above works the same in a spreadsheet.