A trader plans three possible setups in the morning, but by evening there are suddenly 15 trades in the journal. The additional positions arose either out of boredom, emotionally after a loss, or because the market seemed to offer one more good opportunity after all. This is a classic case of overtrading. It includes trades that no longer fit the strategy, trading plan or calculated risk, but were nevertheless executed.
Each individual entry may appear insignificant, but together they increase costs, the error rate and above all emotional pressure, because more trades do not automatically lead to more profits. Worse still, they unintentionally make the trader take on greater risk, and with a strategy that already has a negative expected value, each additional trade only increases the statistical disadvantage. This is why overtrading hampers trading success.
Every additional trade costs money
Every single trade creates costs, even if the price subsequently moves in the expected direction and produces a profit. These primarily include order fees, but depending on the instrument, broker and market phase also the spread and possible slippage. Leveraged products can also incur financing costs.
Assume that entering and exiting together cost 2 euros. With 20 trades, this creates 40 euros in fees, and with 100 trades it is already 200 euros. Even this is only a simplified calculation, because the other costs can hardly be fully represented in a simple example. The spread is the difference between the buying and selling price, meaning that every trade starts with a disadvantage. Slippage, by contrast, describes the difference between the expected and actually executed price. Especially in thin market phases and during rapid movements, this can lead to a considerable deviation and therefore a major disadvantage for the trader.
A trading idea must first earn all these costs and deviations before it can make a positive contribution to the account at all. The smaller the planned price target, the more significant the cost block becomes. Anyone doubling the number of trades does not therefore automatically double the number of promising opportunities – initially, they double the number of entries, exits and possible bad decisions.
An active strategy and overtrading are not the same thing
An active strategy can call for many trades – trading frequency alone does not prove overtrading. A position belongs to the strategy only if it consistently follows a previously defined set of rules. A planned trade has, in particular, a specific setup in a relevant price zone, an entry point, an exit logic and a defined position size. A spontaneous follow-up trade, by contrast, often arises only after a price movement and is then usually justified after the fact. This makes overtrading difficult to recognise. Only an evaluation over several weeks reveals whether the additional positions actually made a positive contribution to performance.
For this purpose, positions must be separated according to why they arose:
- Rule-compliant setup
- Entry outside the trading plan
- Trade after a loss
- Trade after a gain
- Position out of boredom or time pressure
- Additional trade intended to compensate for an apparent loss
The pressure to act rises after a loss
A loss does not always end the trading day. It often triggers the next trade, however. The account balance is supposed to be restored quickly after a loss of 50 euros. The next position is therefore opened earlier, chosen larger or placed at a worse price level. The trade no longer pursues only a new market hypothesis; it is also supposed to at least compensate for the previous loss.
The market does not know this history and has no interest whatsoever in the circumstances of an individual participant. A losing trade does not automatically increase the probability of the next gain. Anyone who continues trading immediately nevertheless changes the original rules. After a gain, the same mechanism can work in the other direction. A successful trade increases confidence, and the next position is made larger or checked less carefully. A positive result then produces a series of trades that had little to do with the original plan.
Overtrading is therefore not only a problem of losses. Overconfidence after a winning streak can also increase trading frequency.
BaFin data show a connection between activity and losses
A BaFin study on turbo certificates examined the trading behaviour of German retail investors between 2019 and 2023. According to the study, 74.2% of the investors examined suffered losses. The average loss was EUR 6,358, or more than EUR 3.4 billion in total. The study also found a connection between more frequent trading activity and higher probabilities of loss.
However, the figures relate exclusively to turbo certificates and not to every form of day trading, so they cannot be directly transferred to all people who trade in the short term. The data nevertheless show an environment in which short holding periods, leverage and frequent decisions meet. The result: Frequent trading can cause losses and at the same time be a sign that trading is already becoming riskier or more unstructured.
A trading journal makes overtrading visible
Without records, overtrading can hardly be identified reliably. Memory primarily recalls large gains, quick losses and particularly frustrating decisions. The many small trades in between quickly disappear from memory. A trading journal should therefore record not only entry, exit and result, but also:
- Number of trades per day
- Setup and market phase
- Result before and after costs
- Time since the previous trade
- Position after a gain or loss
- Deviation from the trading plan
- Average holding period
- Daily result with few and many trades
Such an evaluation can reveal whether the result turns negative after a certain number of trades. Perhaps the first three trades of a day are positive on average and all later ones are negative. Perhaps the largest losses occur within 30 minutes of a losing trade. Costs must also be recorded in full. A trading journal that shows only the gross profit does not make overtrading visible.
Trading limits restrict the number of poor decisions
A daily loss limit protects against a single uncontrolled trading day. It does not automatically prevent overtrading, however. An account can also slowly lose money through many small losses, unnecessary entries and rising costs. Additional rules can limit trading frequency:
- Maximum number of planned trades per day
- Break after a complete loss
- No increase in position size during a losing streak
- Review of the setup again before every entry
- Evaluation after trading ends instead of spontaneous analysis while the position is open
- Reduced activity with unusual spreads or low liquidity
More trades do not prevent a negative expected value
A strategy loses an average of 3 euros per trade after costs. With ten trades, the statistical disadvantage is 30 euros; with 100 trades, it grows to 300 euros. A single large gain can recover this result in the short term, but the trading costs and negative expected value do not disappear as a result. Anyone who simply increases the number of trades after a losing streak does not change the quality of the trading idea. Even a profitable strategy can be harmed by overtrading if the planned trades have a positive expected value but the spontaneous additional positions have a negative one.
A proper evaluation therefore does not begin by asking how many trades were possible. It begins by separating trades according to rules, costs and results.
A journal is mandatory
Anyone executing trades that do not comply 100% with the actual set of rules falsifies their statistics and makes it difficult to work on their own strategy. Unnecessary trades should therefore always be avoided, especially when they arose from emotional weakness such as a loss or an excessively long winning streak. Every additional entry creates costs and forces the trader to take on risk again. They may have to accept slippage, fees, bad decisions and emotional reactions once more. The spiral begins to turn faster and faster.
To prevent this, every conscientious trader should keep a trading journal or diary and record as much as possible in it in order to recognise mistakes and deviations quickly.
Letzte Aktualisierung am 2026-08-20 at 08:59 / Affiliate Links / Bilder von der Amazon Product Advertising API
