How to Stop Overtrading, Including Trading Out of Boredom

What is overtrading in trading?

Overtrading is taking more trades than your plan allows: more entries, in more markets, on weaker setups than the ones you wrote down. It is measured against your own plan. Twenty trades can be normal for a scalper who planned twenty, and three can be overtrading for a swing trader who planned one.

The word has a second meaning in business, where it describes a company growing faster than its working capital can support. This guide is about the trading meaning.

You are probably overtrading if some of these are true:

• You take trades that are not on your setup list, because they are "small".
• You trade because the market is open, not because a setup is there.
• Your trade count climbs on slow days rather than on days your setups appear.
• You keep trading after reaching your daily goal or your daily loss limit.
• Your highest trade-count days are also your worst days. Check your journal for this one.

Why do I overtrade?

Usually for one of five reasons, and each needs a different rule.

Research outside trading shows how hard waiting can be. In a series of 11 studies, Wilson and colleagues (2014) found that people typically did not enjoy 6 to 15 minutes alone with nothing to do but think. In one study, 12 of 18 men and 6 of 24 women gave themselves at least one electric shock during a 15-minute thinking period rather than sit with nothing to do.

Doing something also feels safer than doing nothing. Bar-Eli and colleagues (2007) analysed 286 penalty kicks and found that, given where the kicks actually went, staying in the centre was the goalkeepers' best strategy, yet they almost always dived left or right. Their explanation: conceding after doing nothing feels worse than conceding after acting. The authors call it a bias for action, and a slow market is where it bites.

For some people trading is also entertainment. Among about 1,000 German brokerage clients, those who said they enjoy investing or gambling turned over their portfolios at twice the rate of their peers (Dorn and Sengmueller, 2009). In Finland, investors measured as overconfident, and those most prone to sensation seeking, traded more often (Grinblatt and Keloharju, 2009). Both studies looked at investors, not day traders.

What does overtrading cost?

Two things: money and the quality of your decisions.

Barber and Odean (2000) studied 66,465 households at a large US discount broker from 1991 to 1996. The households that traded most earned 11.4% a year while the market returned 17.9%, and the authors argued that overconfidence can explain the heavy trading. These were stock investors, not day traders, but the direction is hard to ignore.

Day traders show a similar pattern. In Taiwan, Barber, Lee, Liu, Odean and Zhang (2020) found that losing day traders were more likely to quit than winning ones, yet 74% of day-trading volume came from traders with a history of losses, and 97% of day traders were likely to lose money in future day trading.

Costs add up with every trade. FINRA warns that frequent trading can bring higher costs and tax effects that erode returns. The CFTC points out that in over-the-counter forex you trade against your dealer, who makes money when you trade more often. The SEC's 2005 bulletin describes day trading as an extremely stressful and expensive full-time job. And every extra trade is one more decision in which you can break a rule.

How many trades a day is overtrading?

There is no universal number, and no study sets one for everyone. The number in your plan is your limit. Anything above it is overtrading; anything at or below it is fine, including zero.

Here is how to set your number:

1. Count how often your setups appear. Go through your journal or backtest and count your planned setups per session. If they average two a day, a cap of ten is not a cap.
2. Set the cap at or just above that count. A busy day fits, and a slow day does not fill up with filler.
3. Fit it under your daily loss limit. If you risk 1R per trade and your limit is 3R, a cap of three means stop-outs alone cannot take you past your limit, slippage aside. Here is how to set a daily loss limit.
4. Write it down before the open. Count every entry, including re-entries on the same idea.
5. Stop when you reach it. Win or lose, the day is over.

This is how the same rule can look in different plans. The numbers are examples of how a plan can be written, not recommendations:

If you trade stocks on margin in a US account, your broker's intraday margin requirements apply on top of your own cap. FINRA's page on frequent intraday trading (opens in a new tab) explains them.

What is the difference between overtrading and revenge trading?

They overlap often: revenge trading is one of the fastest ways to blow through a trade cap. Use both rules. The cap handles the count, and the routine in what to do after a losing trade handles the minute after a loss.

How do I stop overtrading?

Six steps. The first four happen before the open.

1. Set a trade cap. Use the method above and write the number where you will see it.
2. Write an A-setup list. Name the setups you trade and their exact triggers. Anything not on the list is not a smaller trade; it is no trade. For the wider set of rules, see trading discipline rules.
3. Use setup alarms instead of watching. Set price alerts at your levels and step away from the 1-minute chart. Less time staring at candles means fewer chances to click on one.
4. Treat cash as a position. Being flat is a decision, not a gap in your day. When no setup comes, write "flat" in your journal as the position you held.
5. Add a walk-away rule. Write an if-then rule for the moment the urge shows up, for example: "If I catch myself looking for a trade instead of waiting for one, then I close the platform for 15 minutes."
6. Review weekly. Tag each trade as planned or unplanned. Once a week, add up the R of the unplanned trades. That number is what overtrading cost you that week.

How do I stop trading out of boredom?

Boredom trading happens when the market slows down: a quiet midday, a holiday week, a tight range. If your market goes quiet in the middle of the session, which many US traders call the lunch lull, plan for it instead of fighting it.

• Decide your hours. Trade the part of the session where your setups actually appear, and write those times into your plan. Outside them, the platform is closed.
• Give the quiet time a job. Review the morning's trades, update your journal or study one setup. Waiting is easier when it is not empty.
• Cut the stimulation. Close the scanner and the feeds and keep only your alerts.
• Count a flat day as a good day. If you followed every rule and no setup came, your plan worked.

If you notice you cannot stop even when you want to, or you trade mostly for the feeling, read is day trading gambling, which lists where to get help.

When should I not trade?

None of these needs willpower in the moment if it is written down before the open. The trading psychology guide shows how the pieces fit together.

How does TradeMind help with overtrading?

Everything above works on paper. TradeMind: Trading Psychology, the iPhone trading psychology app (App Store ID 6761249038) by Nikolaos Aristotelis Adamidis, puts it into a morning routine and a set of short lessons.

• The TradeMind Daily Pledge. Before the open you set a daily loss limit in dollars or R, a maximum number of trades (1 to 12, default 3) and one if-then guardrail, then hold for 1.5 seconds to seal it. One of the four triggers is "I feel bored or restless", and the four responses are "step away for 10 minutes", "close the platform for the day", "log it in the Tilt Protocol before acting" and "take a walk and reset". If you told the app's quiz that your worst decisions come when you are bored in slow sessions, the pledge pre-selects that trigger. TradeMind has no broker connection and does not count your trades, so keeping the cap is up to you.
• The Curing Boredom track (Dopamine Management). Ten audio lessons of about 3 to 6 minutes each: Dopamine Loops, Action Bias, Cash is a Position, The Setup Alarm, Deep Work, Process over Outcome, The Boredom Audit, Intermittent Reinforcement, Meditation for Traders and Professional Patience. Each has written notes and 2 journal prompts. The Setup Alarm is step 3 of this guide, and The Boredom Audit asks you to total what trades taken out of boredom cost you. See the Curing Boredom track.
• The TradeMind Tilt Protocol. Boredom is one of its five states, described in the app as "Craving action. Gambling." You rate it from 1 to 10 and read six cards over a front-camera mirror that records nothing. The three boredom lines are "Cash is a position.", "I only trade A+ setups." and "I find peace in doing nothing." Choosing to resist adds 5 to the TradeMind Trader Readiness score; choosing "I tilted" subtracts 20 and caps it at 50 for the day.
• Points for the process. Discipline Points come from the pledge (20 a day), lessons (25 each), journaling (15 a day) and resets (10 a day). Nothing in TradeMind's points or ranks rewards taking trades or making money.