Today I want to consider the subject of over-trading. This can take two forms:
- Frequency of trading: we over trade when we take trades in breach of our strategy.
- The amount at risk relative to our capital: we over trade when the size of our position threatens risk of ruin.
Frequency of trading assumes that firstly we have some sort of strategy and that you have have developed some rules to implement that strategy. And, secondly, we execute trades in breach of those rules – we take trades not within our rules. (more…)