Overtrading

Unfortunately again today I was focusing on the money and made some unrealistic goals. Last Friday when I traded, I traded with more contracts than I did today, but set the same goal of $2K. Sometimes there is this law of diminishing returns.

This really deserves a separate blog entry as overtrading can really cost traders big time. I've read articles, most recently by a guy named Markus H. that talks about overtrading. One of the things about me setting a daily monetary amount to reach is to prevent overtrading. The thing I did not take into account today, not sure why, was the size of my position and the goal.

My goal typically is $300 with 1 contract. So, it would stand to reason if you're dealing with 4 contracts, that would be a $1200 goal. It would stand to reason. I made my goal $2K, which is an extra 67% more than I would need to make, basically nearly doubling the time I was meant to spend. Typically with to make $300 with 1 contract takes usually less than 1/2 hr.

Today I've spent over 4 hrs trading and that's not bad if I'm overall making money, but if I give back the majority of my profits, that is not a way to successfully trade. I made many good trades that were profitable, as well as costing. However, there is still considerable room to improve.

The lesson here is to keep the goals small and managable. My goal since I was using 4 contracts (legging in 2 at a time), the max this goal should have been is $1200. Once that is reached, stop. I didn't, so it ended me giving back a good portion of my profits. not a good thing.
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