Overtrading and chasing losses
What you learn in 3 minutesA single trade that goes wrong is a cost. A day of thirty trades that go wrong is a pattern, and the pattern is what empties an account. On USD/INR, one pip on one standard lot is ₹10, so the size of the damage is decided by how often you trade and how large you trade, not by how strongly you feel about the next move.
Thirty trades, ₹6,000 in costs
| Step | Amount | Note |
|---|---|---|
| Trades in the day | 30 | the number of entries taken, against a plan that allowed 3 |
| Average spread cost per trade | ₹20 | 2 pips on 0.10 lots: 2 x ₹10 x 0.10 |
| Spread cost for the day | ₹600 | 30 x ₹20 |
| Loss from the trades themselves | ₹5,400 | the net result before costs, taken from the day's record |
| Total result for the day | -₹6,000 | ₹5,400 + ₹600 |
| Cost as a share of the loss | 10% | ₹600 ÷ ₹6,000, rounded |
Brokers vary in how they quote and round spreads, and some charge commission on top. Check the contract note for the figures that applied to your own trades.
The mistake people make here
The common mistake is to treat a losing trade as a debt that must be repaid today. Size goes up, the number of trades goes up, and each extra trade pays the spread again. Instead, set a daily limit before the session starts, in rupees and in number of trades, and stop when either is reached. If the plan allowed three trades, the fourth is not a trade, it is a decision to break the plan.Check yourself
You take 20 trades on USD/INR at 0.10 lots, and the average spread is 2 pips. What does the spread cost you in total?
One pip on 0.10 lots is ₹1, so 2 pips cost ₹2 per trade. 20 x ₹2 = ₹40.
Your plan allows 3 trades a day. You take 12. If each trade costs ₹15 in spread, how much extra did the nine trades beyond the plan cost?
12 - 3 = 9 extra trades. 9 x ₹15 = ₹135.
A day ends with a net loss of ₹4,000, of which ₹500 is spread. What share of the loss is spread?
₹500 ÷ ₹4,000 = 0.125, so 12.5%.