How to stop overtrading

Not “too many trades”. Too much simultaneous risk, taken in conditions that do not support it, in sizes chosen by how the last trade went. Ten small positions in a strong tape may be fine; three correlated ones in a weakening tape may not be.

Risk per trade

A fixed fraction of capital — commonly 0.5% to 1%. It fixes the size once the stop is chosen, so the size is never a mood.

Portfolio heat

The total you would lose if every open position stopped out on the same day. Cap it — 6% is a common figure — and treat it as the gate on the next trade.

Position count

The number of open ideas you can actually watch. Beyond about eight, each one gets less attention than it needs, and attention is what stops a small loss becoming a large one.

Every limit works until a setup you love arrives when heat is already at the cap. That is the entire test: a limit you override on the day it binds is not a limit, it is a decoration. Write it down, and record the skip when you take it — a passed trade is a decision, and the ones you skipped are data about your process.

The most effective anti-overtrading rule is not personal at all: do not add new long risk in a market that does not support it. In a mixed or weakening tape the number of qualifying setups falls to nearly zero, and the trades still available are the ones you are talking yourself into.

Today’s reading states that ceiling before you look at any chart — which is the only order in which it can help.

After each closed trade, answer one question: did you follow the entry, the stop and the size? Yes, partly, or no. Over thirty trades that single field separates “my process does not work” from “I did not run my process”, and they need completely different fixes.