"Overtrading" - one of many fallacies based on FURU logic

rexlord

Junior member
36 3
Among all of the cliche trading FURU (Faux Guru) jargon, "overtrading" has to be one of the worst!

It is an absolute joke to anyone who passed 5th grade math.

Why would you not want to "overtrade"?

Suppose your stats show that over 50 trades - net wins were $10,000 and net losses were $5,000. So why in the world would you want to trade less???
You would trade MORE, not less. Look for more markets to trade, look for foreign markets, look for anything it takes to generate MORE of those type of trades.

Of course, the FURU argument is: you only look for that one "best setup" - one trade per day/week and trade SIZE on the best plays.
But based on this logic, why not only do one "best of the best" setup per year and just bet everything you own on it?
Well, nobody is going to do that because your win % and profitability has absolutely nothing to do with the frequency you trade.
 

dbphoenix

Legendary member
6,952 1,244
If one is taking all those trades but only those trades that meet the requirements of his trading plan, he's not overtrading.

If he has no trading plan, even one trade is overtrading.
 

Mr. Charts

Legendary member
7,364 1,181
"over" trading is what it says on the can
too many trades
usually emotional causes or pure ignorance
 

tomorton

Legendary member
7,394 998
As I said elsewhere here just today, if you have a consistently profitable strategy, don't stop trading after a loser or string of losers, keep on trading. The law of averages will bring the money back.
 

barjon

Legendary member
10,325 1,569
As I said elsewhere here just today, if you have a consistently profitable strategy, don't stop trading after a loser or string of losers, keep on trading. The law of averages will bring the money back.
It's rare for me to disagree with you, Tomo, but there's many a down and out with their arses hanging out of their trousers still muttering to themselves "the law of averages will bring the money back"
 

tomorton

Legendary member
7,394 998
What I'm saying is if you have a good % win rate, there is only 1 way that win rate can be badly damaged - assuming it wasn't a good win rate on pure good luck - and that is if you reduce the number of trades so that statistical variation prevents your win rate exercising. And that won't be bad luck, it will be statistically unavoidable. But the larger your sample of trades, the more closely the actual win rate will track your standard win rate.
 

barjon

Legendary member
10,325 1,569
Key phrase: "if you have a consistently profitable strategy".
Yes, and your consistently profitable strategy is consistent only up to now. It may continue to be equally consistent, but it may not.
 
Last edited:

barjon

Legendary member
10,325 1,569
Depends on whether or not the strategy is self-correcting and self-adapting.
True, but future consistency is still not necessarily assured at the same level.
 

new_trader

Legendary member
6,231 1,282
Another meaning

"over" trading is what it says on the can
too many trades
usually emotional causes or pure ignorance
It can also mean trading a size that is out of proportion to the capital. This is what the phrase "Over-trading is financial suicide" refers to.
 
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Mr. Charts

Legendary member
7,364 1,181
Consistency must include strategies which are adaptive to different market conditions. The success rate must also be high enough so that long runs of losers do not occur. Strategies that work and suddenly stop doing so become obvious quickly.
 

Lúidín

Established member
818 61
Among all of the cliche trading FURU (Faux Guru) jargon, "overtrading" has to be one of the worst!

It is an absolute joke to anyone who passed 5th grade math.

Why would you not want to "overtrade"?

Suppose your stats show that over 50 trades - net wins were $10,000 and net losses were $5,000. So why in the world would you want to trade less???
You would trade MORE, not less. Look for more markets to trade, look for foreign markets, look for anything it takes to generate MORE of those type of trades.

Of course, the FURU argument is: you only look for that one "best setup" - one trade per day/week and trade SIZE on the best plays.
But based on this logic, why not only do one "best of the best" setup per year and just bet everything you own on it?
Well, nobody is going to do that because your win % and profitability has absolutely nothing to do with the frequency you trade.
you would not want to overtrade..as..by doing so you run the risk of losing a very large % of your trading capital..

this in turn will result in untold emotional damage..which will then start a vicious circle of doubting trades..which will result in bad executions..which will affect your overall performance

in summary..it all depends on how stupid you are..and how many idiots you listen to talking about things that do not really matter when it comes to your personal financial decisions

you either know how to trade..or you do not..if you do not know..then the best way to learn is by risking a very small % of your available capital on each trade until you fully understand what you are doing right..and doing wrong

the reality is that it is actually very simple..but nearly everyone who tries messes it up due to mixing with the wrong people for way too long..and picking up some very bad habits along the way

LN
 

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