Why Traders Trade Too Much

08/27/2014 6:00 am EST

Focus: STRATEGIES

Tom Alexander of AlexanderTrading.com shares several reasons why traders trade too often and suggests that the key is to be more selective and discriminatory in your trading.

Almost all new traders trade too much. Probably most traders regardless of experience level trade too much. There is certainly more than one reason and here are a few of those reasons.

It is how they are trained. Traders typically take courses, sit in chat rooms (worst possible venue for learning anything valid—blind leading the blind) and peruse the Internet. The vested interests in the trading industry—exchanges and brokers are transaction-based enterprises—the more trading there is the more money they make. They are not rewarded for the success of their clients; they are rewarded by how much their clients’ trade.

Traders are also trained by trading educators, software vendors, platform vendors, and others in the industry to think there is a magic bullet that is the key to trading success. Oh, and they are the ones that can give you (and a tight-knit group of tens of thousands) that special secret.

As a corollary to both of the above reasons that traders trade too much is that they simply don’t know how to be more discriminatory in their trading. They have a sense that they might miss the big opportunity at any moment so they jump in and out all day long on little more than a whim. Learning to be selective and knowing exactly what you are looking for requires knowledge very few traders have.

By Tom Alexander of AlexanderTrading.com

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