• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint

Secret 16

Overtrading is your greatest enemy

Gann called overtrading the “greatest evil.” He felt it was the cause of more losses than anything else, and who am I to disagree with one of the masters? The average novice trader really doesn't have a clue as to how much money is needed to be successful, and he invariably buys (or shorts) more than prudence dictates. He might be right in his analysis or determination of the major trend, but because he takes too big a position, he is forced to liquidate when the margin clerk calls. When he's liquidating, so are the other novices, and that's when the smart money moves in. The money runs out just at that critical time when it's ripest to enter. The over-trader is exhausted and misses the profit opportunity he had once seen so clearly in those more optimistic days.

Be conservative, keep your cool, and avoid the temptation to trade more contracts than your margin can reasonably support in normal markets. This is especially important at tops and bottoms where the excitement, the rumors, and the news are at fever pitch. Human nature has a tendency toward overconfidence at tops and bottoms. Study your charts, and don't let hopes or fears influence good judgement.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint