Why Does Quality Trading Matter Over Quantity Trading In Forex

By Author: Roff benjaminn
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Generally, traders just want to trade and earn profit quickly. The constant fear of losing out on a major win keeps haunting them and they entirely forget that the market is not running away. If you go by the past trends, you would notice that the market keeps repeating its trends. There is no need to fret over a lost opportunity as it would be back before you know! Don’t fall into trading as if it is the last day of the market. Over-trading is a leading reason why so many traders fail and do not achieve their investment goals. Visit multibankfx.com

What is considered “over-trading”?
You’re over-trading if you realize that you are in every trade. If you are obsessing over the markets and your trades, it is all that you can think about, you’re certainly over-trading. If you are an amateur player still figuring out what portfolio diversification means and yet you have more than one trade active at a time, there is a chance that you are over-trading.

We can go on and on speaking of different ways of over-trading, but the core component remains that you will realize ...
... you’re over-trading when your trades are giving you sleepless nights and you are losing way too much money.

The importance of edge
A trading edge refers to a fine technique, observation or method that leads to cash advantage over other traders in the market. It need not be too complex to solve the purpose. Whatever helps you add a couple of points to the winning side of an equation could give you an edge for a long time.

Your trading edge dampens with a higher number of trades. A trading edge can improve your success rate but the truth is, you would find a number of high-probability trade signals weekly, monthly or annually irrespective of your edge. As you start moving away from your trading edge and settle for poor-quality trades which don’t fit the bill, you hamper your success rate.

• Market Noise vs Quality Trades – Learn to differentiate between market noise and real high-probability price events. If you find it difficult to draw the line between the two, it is more likely that you will be settling for trades that are more along the lines of market noise. In the long run, this would simply weaken your trading edge. There is one thing that is crystal clear here, before investing the money you’ve earned from your blood and sweat, ensure you are fully aware of your trading edge and how you can trade it to avoid over-trading!

Always be aware of the trading fees you are paying
Ever wondered how casinos are able to make tons of cash so regularly? Their secret lies in frequency. The high-frequency of games played indicates that their edge will keep putting them at an advantage again and again. The house is the winner in every scenario. In the case of trading, the broker is the equivalent of the casino house. It is not just the number of people trading but also the fact that almost 90% of them are over-trading. So what is it that you need to do? You just have to trade less.

Consider this: For a set of 100 trades you pay back about 100 to 150 pips as spread or commissions. Hence the greater the frequency, the higher is your trading cost.

You don’t want to trade like a casino player but rather, you would want to choose your trades carefully and assess them well before putting your money in. Essentially, you want to keep up your edge by not spending more than necessary on spreads.

Too much of anything is bad
Observe a majority of endeavors inclusive of trading, it is the overthinking and overanalysis which turns out to be fatal. It affects the rewards we could have earned had we not been thinking about them so much. Our brain likes to be rewarded, if something feels good it is like a dopamine shot and you want to keep doing those things again. You simply get used to it no matter how good or bad it is.

Now that you are aware of this, you must also understand how easy it is for us to get addicted to negative thoughts. Constantly make the effort to train your mind into working towards a positive mindset.

When you trade with the laptop flashing numbers and all the prices as well as colors stimulating our response, it is easy to be tempted and enter trades in a click without much thought. By chance that leads to a few wins and you end up thinking “that worked, maybe I should try again”, now that is what leads you to the dangerous path.

Without a trading plan where your trading edge determines your behavior in the market, over-trading is a very likely outcome as you would want to keep chasing the winning trade. Make sure you are planning your trades without any emotions being in play, in a purely objective manner from the very first day. Addiction can be dangerous and you may end up losing a lot of money if you are not wise about your trades.

Closing thoughts
It is a harsh reality that you would not find enough high-probability price events in the market every week, month or year. Therefore, it simply aligns with what we mentioned before that the higher your number of trades, the more your trading edge shrinks. Yet, even after knowing this, there are so many traders who keep over-trading very frequently and end up losing more and more money. The ideal strategy to keep your trading frequency low and not trade too often while not ignoring the trade setups that are already out there. Needless to mention, you will pick a lot of tricks and tips in your trading journey as you keep learning and differentiating between what is the perfect and the most visible trade set up. It is not something that hits you like an epiphany or an overnight realization.