March 21

OverTrading —Why You Do It, and How To Stop

By Yvan


In this short post, I’d like to talk about our compulsion to overtrade. But to make my point, allow me to be dramatic for a few seconds: we are all slaves!

As human beings, we are slaves to substances, activities, beliefs…. we are slaves to doing, to becoming, and to seeking something else than our current reality.

Sugar, coffee, food, sex, drugs, success, money, gambling, spiritual seeking, self-improvement… not everybody is addicted to the same thing, but everybody is addicted to something.

We’re on a constant search, and in trading, overtrading is how we express it.

For instance, say, the market gives you an opportunity in the form of a rare but high probability setup.

You get in, but next thing you know, you’re breaking your trading rules–you’re removing your stop-loss, going in with a trade size that’s too big, entering other trades you shouldn’t…

And you don’t even know why you overtrade like this. You’ve made those mistakes countless times before, and you’ve paid the consequences through unnecessary losses… and yet, here you are doing it again.

The thing is, we do this because we’re addicted to certainty. So we act out that addiction through overtrading, even though every time we swear to ourselves: ”This is the last time!” But it never is.

Overtrading is a compulsion, and there’s a compulsion because there’s an underlying addiction.

The Underlying Driver

If you look closely at what is actually happening when there’s a compulsion, you’ll see that it doesn’t even matter what the object of addiction is, the addiction has basically the same root:  our real addiction is to our feelings!

I know that sounds weird, but look at your own life and reverse engineer any compulsion that you may experience.

Let’s say, you consistently break your trading rules. Ask yourself the following questions:

1. Why do I break my rules?

You might say that you don’t like losing, or being wrong, or whatever. Sure, all of these are symptoms of an addiction to certainty. But keep probing:

Why am I addicted to certainty?

Well, you might say you want to earn money, you like safety, you want to provide for your family, and a thousand other reasons.

But why?

You might say, “Well, I don’t know why… simply because!”

Here’s the thing. If you keep peeling off the layers like that, you’ll see that the core of why you do what you do is to satisfy a feeling.

You might find any number of stories to explain why, but inherently (at the root level), you’re only doing what you do because you’re addicted to certain feelings and you want to stay away from others.

Willpower isn’t Enough

So, our real addiction is to our feelings. And that’s what causes us to overtrade.

That being said, willpower isn’t enough to curb that addiction, and hence, overtrading.

We can’t always use logic to overcome addiction and compulsion. That’s a fact. If our logical/rational mind was able to overcome addiction and compulsion just by sheer willpower alone, then everybody on earth would be successful traders, writers, athletes, entrepreneurs, etc., etc…

Because everybody would rely on logic and willpower. Those alone would be enough.

But it doesn’t work that way.

Another approach needs to be implemented.

If you get into the habit of paying close attention to your inner life (mainly through a practice like mindfulness meditation), you’ll begin to notice what fuels addictions and compulsions.

Typically, there’s a thought that flashes in your awareness. And that thought usually plants a seed.

Then, when that seed goes unnoticed, it starts to germinate – it produces a stem and, later, from that stem, branches begin to come out and eventually leaves. A chain of thought is produced.

Memories of past experiences and projections into the future create a story that plays in your mind at an unconscious level. And this comes with certain feelings in your body – pleasant or unpleasant.

Once that initial first thought flashes in and out and you haven’t noticed the seed it left, you’re basically out of luck because now the seed is growing and your body and mind are starting to tell you “I have to do this. I have to remove that stop-loss.” 

You become more and more agitated as the story keeps telling you why you should do this or that even though your trading plan says not to. Every second that passes, your rational mind is battling against that urge to overtrade. It’s trying to control the urge with willpower, judgment, etc.

But, really, no amount of logic or willpower is going to interrupt that because a compulsive response is a much more primal and strong response.

Noticing the Seed

Again, a compulsion doesn’t arise as a logical play of thinking; it arises as a thought that flashes in and out of existence. And this happens automatically, subliminally, fast, and involuntarily. So it’s very difficult to spot.

What we can do instead is spot the seed as it germinates but before it turns into a tree– overtrading.

As you become aware of the seed, you can stop it from developing.

What I forgot to mention is that the seed in question is magical. It germinates and grows when you ignore it or try to bully it. But curiously, when you look at it willingly and with kindness, it behaves differently. It slowly dies off.

This is what we do in the Trading Psychology Mastery Course. I’m actually getting you to spot the seed, look at it, and investigate the feelings and the sensations that make up compulsive urges.

So we’re not even engaging the rational mind at all. We don’t ‘willpower’ out of existence the urges/addictions/compulsions that cause overtrading, nor do we ignore or bully them. We simply watch them.

And in watching them (merely watching), they defuse on their own. The seed dies off, and the plant doesn’t grow.

When that mindful awareness gets re-enforced through practice, it becomes the norm of the mind which brings greater consistency in our trading.

 

—-

Memorable Lines From This Post

Overtrading is a compulsion, and there’s a compulsion because there’s an underlying addiction.

Click to Tweet

If our logical/rational mind was able to overcome addiction and compulsion just by sheer willpower alone, then everybody on earth would be successful traders, writers, athletes, entrepreneurs, etc.

Click to Tweet

When mindful awareness gets re-enforced through practice, it becomes the norm of the mind which brings greater consistency in our trading.

Click to Tweet

Share The Full Post


Take it Further with The Trading Psychology Mastery Course

"The course has impacted positively my trading by bringing awareness to my monkey mind habits during live trading. The awareness is impacting my life in general where I am making better choices. i would recommend it highly to every trader I know." ―Mandeep Gill