Image source: https://s.yimg.com/lm/ysbp/img/DOJZXUdHr5SAk0EavqaWN5BJFBHKIR2h5_UirBCfZbFwrVDUqxRERSa_zg9Vz58q.png
From the above definition, we can see that equally overtrading and under-trading can not support traders to maximize profits in currency trading, which are not at all what Forex traders want. Then how to avoid them as tons as possible?
It is common that we hear traders say that they are overtrading or under-trading, equally of which are not best suited for profit-making in currency trading. Then do you have principles of what are they and how to avoid them so as to trade wisely?
What is under-trading and overtrading?
Another way to avoid overtrading or under-trading is to make proper foreign exchange trading plan in currency trading, which is especially beneficial for undisciplined traders. Every trader desires to have a trading plan and play by it. According to survey, most traders who do overtrading or under-trading do not have a exact trading plan to stick to in currency trading, they just watch the market and place trades casually; well, it is quite easy for them to suffer server losing opportunities due to indecision or their worry of losing in currency trading.
How to avoid under-trading and overtrading in currency trading?
2. Trade wisely in accordance with experience in currency trading?
Under-trading means traders keep funds idle and do not use them wisely in currency trading. To a couple of extent, under-trading means missing potential profits because traders are veritably indecisive or worry of losing money so that their orders are nearly pending to be executed. Under-trading would lead to loss of huge trading opportunities and bring low profits in currency trading. There are huge probabilities for only traders to finish up saying things like My trading plan says I should enter however I didnt! or it is a pity that I did not make that trade? Well, it is indeed a pity, however what is done is done.
In order to avoid overtrading and under-trading, traders need to decide the right kind trading sizes that they are able to tolerate.
1. What type of trader they are in currency trading?
Overtrading is quite the other of under-trading. It means excessive purchasing and selling in currency trading; in other words, it means that traders enter too many trades or trade over sizes that are beyond their risk tolerance level. Overtrading is more likely to bring lack of flowing capital when there are better trading opportunities and if only the Forex market go against traders expectation, it would cause severe losses.
Two of probably the most crucial factors that can support weigh overtrading or under-trading are the trading size and the trading times. But different sorts of traders have their own elementary of trading times and sizes. Thus, the first thing traders need to agree with is what type of traders(foreign exchange day traders, swing traders or position traders) they want to be in currency trading. For example, foreign exchange day traders and position traders may differ widely in their trading times and sizes. A foreign exchange day trader might trade 3 to 6 or even more within a trading day however the trading sizes are relatively small; while a position trader might only trade 3 or 6 times a year however the trading sizes are relatively big. Moreover, a part-time trader might trade less than a complete time trader for they have other job to do. Thus, so as to avoid overtrading or under-trading in currency trading, traders need to know what type of traders they are first.
