Quantity vs Quality
This leads me to our next topic this week, overtrading. As previously stated, many new traders think that you must take many trades a day to make a living at trading. Your broker will love you for being an active trader, but your profitability may not be much higher than someone who takes far fewer trades than you. In fact, it may be worse! I suggest new traders to take only a small number of trades per day or week, and only increase that number as they become more and more profitable. Here is my suggestion: if you plan on being a daytrader, consider only taking 2 trades a day. This way, you will concentrate on the higher quality levels, and not chase any trades. If you know you will be near your trading computer for several hours today, but only allow yourself two trades, I doubt that you will fire them both off in two minutes!
When do you get to trade more often? When you are bored making money with 2 trades a day. That sentence has two very important components. The first is you HAVE TO BE MAKING MONEY! I wouldn’t want to trade more often if I wasn’t profitable – all you would be doing is losing more money faster! The second component is you have to be bored with that level of activity – you have to want to trade more often. When do you get to do 4 trades a day? When you are bored making money with 3, and so on and so on.
What about swing traders? Try 2 trades a week, until you are bored with it. Position traders may do 2 trades a month. Eventually you will get to a point when trading more often isn’t really adding much to your P & L, but it is adding to your time in front of the computer. Walk away and do something else with your time!
In conclusion, concentrate on the higher quality supply and demand zones, take fewer trades, and maybe make more money! Until next time
Rick Wright can be contacted at The Online Trading Academy