Many investors get carried away when investing in the share market. This is particularly true especially during the bull market where everyone seemed to be making money (although that might not be the case). However, if you are currently enjoying a run of profits in the share market, you must not get too carried away to a point where you might be over-confident and end up overtrading.
The perils of overtrading are one of the biggest mistakes committed by investors and they constitute one of the biggest losses for investors. In fact, it has been reported that around 95% of traders are overtrading which is a situation where you trade too often and too much. The more seasoned investors will know that overtrading is a big problem which is difficult to curb. Some have termed overtrading as an addiction where the investor seemed to want to buy and shares all the time, up to a level where they are trading for the sake of trading.
The sense of not wanting to lose out is the psychological barrier that one must overcome because experience will tell you that you need to trade throughout the day. In fact, it would be more beneficial if you are pickier with the shares you are trading in instead of buying anything which looks attractive. This is where filtering exercise must be carried out.
In the end, investors become lost with what they are trading in and in most cases, they are not aware that they are actually overtrading. It is more a behaviour than a practice where you find yourself trading too often in a day and trying to capture as much as you can. Trading too often would allow you to earn more through the volume buying but the major problem that you will find here is the fact that you will not be able to monitor all the contracts you have filed. It is possible that if you trade less you might benefit in the long run. The whole idea is to ensure that your focus is not too saturated where you can then focus on a few contracts per day rather than tens.