December 27, 2019 at 9:49 PM #225750Nitin BhatiaKeymaster
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Over Trading Risk is a huge loss in the stock market. Normally, Over Trading is the result of overconfidence. It’s a very common perception that if the trading accuracy of a trader is very high then he/she can take hundred of trades and generate a profit in millions on a daily basis.
I personally follow two golden rules to avoid the Over Trading Risk.
1. I focus on the quality, not on the quantity i.e. i take less no of trades but quality trades wherein the probability of success is very high.
2. It is not mandatory to take all the trades i.e. As an investor or trader, you should not try to catch each and every trade.
You can also avoid the Over Trading Risk by
1. Keeping your expectations to a realistic level in terms of profit or returns from the stock market.
2. You should not be overconfident about your trades.
3. You should fix the no of trades every day. Also, strictly follow the rules and you might end up with No Trade but it is perfectly okay.
4. Maximum Over Trading Risk is a result of revenge trading.
5. Money management can also shield you from the Over Trading Risk.
6. As we have very limited energy, attention span, and energy. Therefore, we should conserve the same for the limited no of trades.
7. Over Trading also results in greed and fear.
8. It is proved through research that profitability is inversely proportional to the no of trades i.e. Over Trading result in less profitability.
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