Are you Overtrading? 6 Great Ways to Tell
Posted on Mon 13th Jul, 2009 03:28:39 PM
Too much trading is not an effective way for any investor to operate and is a problem. The common mentality is that the more active an investor is the more money he or she must be making. This is far from the truth! Today’s Trading Markets offers three great ways to tell if an investor is overtrading:
- They’re looking for action. Meaning instead of following a high probability trading methodology, they’re taking trades on hunches with no statistical edges.
- They subscribe to multiple newsletters (most without written, fully disclosed, track records) and they are at the same time watching the business channels looking for hot ideas. How is this any different than going to a racetrack and buying all the tout selections and also asking strangers “who they like”?
- They trade for the rush. The more trades they do the better they feel. Behavioral psychologists refer to this as compulsive behavior and it’s a serious weakness in any profession or activity.
In addition to these three signs I would like to add several others that are slightly more humorous:
- Half their home bookshelf is full of day trading guides and books. While this alone cannot pinpoint that they are eager to trade way too often odds are they are guilty as charged.
- They give you a glare when you say you are a long term investor, shake their head, then proceed to tell you that day trading is the only way to be successful in the stock market. When you ask them how well they’ve fared this quarter they don’t have an answer.
- They proudly show off the fact that they’ve spent over thousand dollars in trade commissions alone in the past quarter. In their eyes this somehow makes you inferior.
Any signs we missed? Feel free to share them via comment!
Source:
3 Signs You Are Overtrading
Larry Connors, TradingMarkets.com
Trading Markets, July 13th, 2009
http://www.tradingmarkets.com/.site/stocks/commentary/editorial/3-Signs-You-Are-Overtrading-81676.cfm
Seems that the Author has something against daytraders, or swing traders. While the author does make some good point which do need to be considered by any ACTIVE trader the thought that trading on shortened time frames is a losing methodology is inaccurate. I would gladly share my trading performance and would VERY gladly hand my money over to a fund manager who can match that performance, even excluding the management fees. Long term methods of investment are still possible but they are very much flawed and involve far to much exposure to capital risk without accounting for market direction and overal economic effects.
#7 – If they are addicted to the casino, they are most likely an over active trader
I would have to say I am more targeting heavy gamblers than active traders… or maybe just active traders that dont know what the hell they are doing!
Well, commissions paid will never make me feel proud so I guess I’m safe.
I don’t subscribe to many newsletters or watch business channels but I do troll around internet sites looking for tips (and insight?). Later I investigate the stocks further. There are plenty of smart people talking (as well as dumb or dishonest ones–the trick is to tell the difference), and they aren’t paid to say what they say either..
I know many day traders who make a fortune. Sure most lose but most of those are newbies who jump from one method to another on a whim.
Having said that, day trading is not for me. I love going for those bigger moves that last 2-4 months. Passive money is much more fun than earned money