Be Careful: You Might Be Over Trading
One of the big issues that you can run into as an investor is over trading. Over trading involves trading to often. There are serious issues attached to over trading — the biggest being that it is expensive. When you trade too often, you spend a great deal of money on transaction fees. Whether it involves paying a broker’s commission or having to pay a flat rate through an online discount broker, every time you place a trade, you have to pay for it. After a while, too much trading results in you losing a fairly large percentage of your earnings to fees and other expenses. In the end, you realize that you could have had much more if you had not been so eager to always be trading.
Stock Trading To Go offers 3 signs that you might be over trading:
- Looking for market action: Rather than developing a plan, you might be looking for the “next big thing”, trading on hunches or “inside” tips.
- Subscribing to multiple investment newsletters: If you are subscribing to several newsletters, looking for the newest, best ways to make a killing quickly, you might be over trading. While getting good advice is always helpful, getting too much advice, from too may untried and unproven sources, can end up sapping your resources.
- Trading for the rush: In some cases, over trading is the result of a compulsive personality. Some people enjoy the rush they get. Of course, this leads to trading for the sake of trading, in order to feel the excitement.
I would also like to add fear. In many cases, over trading takes place due to fears that an investment is not doing as well as you think it should right now. Additionally, falling prey to panic and the whims of the financial media can create a sense of urgency about trading that is not really necessary. In most cases, you are fine if you adopt a trading strategy that involves you make solid, low cost investment choices that will pay off in the long haul (20 - 25 years).
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
