Overtrading and chasing losses
What the chart shows before you place a trade
Open a chart of EUR/USD near 1.0850 and look at the last hour. You will see small candles, each with a high and a low. The distance between the price you can buy at and the price you can sell at is the spread. That spread is a cost you pay the moment you enter. It does not care whether you win or lose.
Now mark every point where you felt like clicking buy or sell. A chart does not show feelings, but it does show a line of entries. If you took thirty trades in one session, the chart will have thirty small marks. Each mark is a spread paid. At 0.10 lots, one pip of spread costs about ₱58.60. A two-pip spread costs ₱117.20. That number is the same whether the trade wins or loses.
The chart also shows the size of each trade. If your lot size grows after a red candle, the later entries are larger. A larger size means a larger peso cost per pip. So the cost per trade is not fixed. It rises exactly when you are trying to recover. The chart makes that visible if you plot trade size below price.
How the urge to recover changes your decisions
A loss feels like a debt. The mind wants to repay it now. On the chart, that shows up as a new entry within seconds of the last one closing red. The plan said two trades. The chart shows ten. The extra eight are not part of the plan. They are a reaction to the loss.
That reaction has a cost. Suppose the plan allowed two trades at ₱117.20 each. That is ₱234.40. If you take thirty trades instead, the extra twenty-eight cost 28 x ₱117.20 = ₱3,281.60. The day's total cost becomes ₱234.40 + ₱3,281.60 = ₱3,516. That is the spread alone. It does not include any losing trades.
The same urge can raise the lot size. If you double the size, the pip value doubles. At 0.20 lots, one pip is about ₱117.20. A two-pip spread is then ₱234.40 per trade. Ten trades at that size cost ₱2,344 in spread. The chart will show fewer entries but a much steeper cost line. The loss is not being recovered. It is being multiplied.
Setting limits that the chart cannot move
Before you open the chart, write two numbers on paper. The first is the maximum number of trades for the session. The second is the lot size for each trade. These numbers do not change when the market moves. They are set when you are calm. The chart cannot argue with a number already written.
When either limit is reached, stop. Close the platform. The market will still be there tomorrow. If you feel a strong pull to take one more trade, write down what happened in a notebook. Write the time, the trade number, and what you felt. That record is more useful than the trade you did not take.
The next session starts from the plan, not from the previous loss. The loss is already paid. It is not a debt to the chart. The spread you paid is gone. The only thing you control is the next decision. A plan with limits makes that decision easier because it was made before the first candle.
Thirty trades, and what the costs take
| Step | Amount | Note |
|---|---|---|
| Planned trades for the day | 2 | the number written in the plan before the session starts |
| Trades actually taken | 30 | the cluster visible on the schematic chart |
| Size on each trade | 0.10 standard lots | one tenth of a standard lot |
| Pip value at this size | ₱58.60 per pip | one pip on one standard lot is 10 units of the quote currency (100,000 x 0.0001); at 0.10 lots that is 1 unit, converted at about ₱58.60 per unit |
| Cost per trade | ₱117.20 | 2 pips of spread on 0.10 lots: 2 x ₱58.60 |
| Cost across 30 trades | ₱3,516 | 30 x ₱117.20 |
| Cost across the 2 planned trades | ₱234.40 | 2 x ₱117.20 |
| Extra cost from the 28 unplanned trades | ₱3,281.60 | 28 x ₱117.20 |
Spread varies between brokers and by time of day, so the ₱117.20 per trade is an example, not a quote. Some brokers add commission, swap on positions held overnight, or round the pip value; the peso conversion of the quote currency changes with the exchange rate.
Doing it once, step by step
These steps help you see the cost of overtrading on a chart and set limits before you trade. Do them once, in order, on a demo account.
- 01
Open a chart of EUR/USD and note the spread
Use a demo account. Look at the current price, around 1.0850. Find the bid and ask. The difference is the spread in pips. Write that number down. This is your cost per trade before any profit or loss.
- 02
Calculate the peso cost per pip at your lot size
At 0.10 lots, one pip is about ₱58.60. Multiply the spread in pips by that number. For a two-pip spread, the cost is 2 x ₱58.60 = ₱117.20. Write this figure next to the spread. This is what you pay each time you enter.
- 03
Count the trades you would take in one session
Look at a recent hour on the chart. Count how many times you would have clicked buy or sell if you followed every feeling. Suppose the number is thirty. Multiply that by your cost per trade. Thirty times ₱117.20 equals ₱3,516. That is the spread cost alone.
- 04
Compare that with your planned number of trades
Decide on a plan limit, such as two trades. Two times ₱117.20 equals ₱234.40. Subtract that from the thirty-trade cost. The difference, ₱3,281.60, is the extra cost from the twenty-eight unplanned trades. This is money that does not come back.
- 05
Write your limits before the next session
On paper, write the maximum number of trades and the lot size for each. Keep the paper next to your screen. When either limit is reached, close the platform. Do not reopen it until the next planned session.
- 06
Record what happened when you wanted to break a limit
If you felt the urge to trade more, write the time, the trade number, and what you felt. Do this instead of placing the trade. After a week, read the notes. The pattern will show you when the urge is strongest.
The mistake most people make here
The common mistake is to treat a loss as a debt that must be repaid in the same session. The reader adds trades, then adds size, and the day's costs grow faster than any single win can cover. Instead, set the number of trades and the size before the chart is open, and stop when either limit is reached. If the urge to win it back is strong, close the platform and write down what happened; the next session starts from the plan, not from the loss.Check yourself
At 0.10 lots on EUR/USD, what does a 2 pip spread cost in pesos if one pip at that size is ₱58.60?
2 x ₱58.60 = ₱117.20 per trade.
If the plan allows 2 trades but 30 are taken at ₱117.20 each, how much extra cost comes from the 28 unplanned trades?
28 x ₱117.20 = ₱3,281.60. The planned 2 trades cost ₱234.40, so the day's total cost is ₱3,516.
Questions that come up next
What does the chart look like when someone is overtrading?
The chart shows a tight cluster of entry marks. They appear within seconds or minutes of each other. The cluster often starts right after a red candle. If you plot trade size below price, the later bars in the cluster are taller. That means the cost per pip is rising as the session goes on.
How can I tell I am chasing a loss rather than following a plan?
Look at the time between trades. If you enter again before the previous candle closes, you are reacting, not planning. A plan sets the number of trades and the size before the chart opens. If you have already taken more than that number, you are chasing. The chart will show it as extra marks that were not in the plan.
Does a bigger lot size help me win back a loss faster?
A bigger lot size makes each pip worth more. At 0.10 lots on EUR/USD, one pip is about ₱58.60. At 0.20 lots, one pip is about ₱117.20. So a two-pip spread costs ₱234.40 per trade instead of ₱117.20. The loss is not recovered faster. The cost per trade is simply larger.
What should I do when I feel the urge to win it back?
Close the platform. Write down what happened on paper. Note the trade number, the size, and the feeling before you clicked. The next session starts from the plan, not from the loss. This breaks the link between the loss and the next click.
Is the spread the only cost I pay on each trade?
No. The spread is the cost you see on the chart. Some brokers add commission on each trade. If you hold a position overnight, a swap may be charged. The pip value may also be rounded. These vary between brokers, so check your own account terms.
How do I set a trade limit that I can actually keep?
Write the maximum number of trades and the lot size on paper before you open the chart. Keep the paper next to you. When either limit is reached, stop. The numbers do not change when the market moves. They are set when you are calm.
The words used on this page
- Spread
- The gap between the price you can buy at and the price you can sell at. It is a cost you pay as soon as you enter a trade. It is the same whether the trade wins or loses.
- Lot size
- The amount you trade in one position. A larger lot size makes each pip worth more in pesos. So the cost per pip rises with the lot size.
- Pip
- A small unit of price movement on a chart. For EUR/USD, one pip is usually the fourth decimal place. The peso value of one pip depends on your lot size.
- Overtrading
- Taking more trades than your plan allows. It often happens after a loss. The chart shows it as a cluster of entries that grows.
- Chasing losses
- Increasing your trade size or frequency to win back money you just lost. It turns one bad trade into a larger cost. The chart shows it as larger entries after a red candle.
- Swap
- A fee some brokers charge for holding a position overnight. It varies between brokers and by the instrument. It adds to the cost of a trade.
What to take away
- A loss is not a debt that must be repaid in the same session.
- Set the number of trades and the lot size before you open the chart.
- When either limit is reached, stop and close the platform.
- If the urge to win it back is strong, write down what happened and start the next session from the plan.