Here are two scenarios that I believe most of us have encountered. First, it's a volatile trading day; the markets are moving quickly, and chart patterns are setting up fast. We start to act on these patterns. However, they quickly erode; in the fast-moving market, we continue to find ourselves impulsively looking for the next setup. Eventually, our minds cannot keep pace with the market, and we find ourselves trading without thinking. Before we know it, we've severely overtraded, which almost always suggests a losing session.
I know one trader this happened to. He used to make about five trades a day in his market, totaling about ten contracts. However, on this particular day, his total volume amounted to about 200 contracts. Remarkably, this guy broke even on his trades, but after commissions and exchange fees, he still lost more than $500, or 5% of his account value.
