In a recent catch up of the Safety in the Market team we were discussing how to best address challenges we see our students undertaking and the eventual discussion all traders have around how frequently you want to trade.

This question is the inevitable how ‘long is a piece of string’ circular discussion, as it does not end with a clear answer for all people all of the time, so it becomes at best an advisory or better still a cautionary tale.

If I apply my inexact survey via experience and observation, new traders trade more frequently in terms of number and hold positions for less time. This is due to a number of factors:

• The desire to feel the rush and get experience as quickly as possible (the belief is more trades will lead to quicker success)

This can be true for some personality types (the greatest variable in this discussion is the individual and their own make up)

• The desire to trade more often comes after a profit, as the addictive nature of profits can lead to impulsive behaviour. In reality a review of what you did well in that trade should be undertaken to mimic success habits and remove unsuccessful behaviours.
• Newer traders tend to not be able to hold positions over weeks due to the emotional pull of profits or losses. This of course is normal behaviour, but it takes time for these emotions to embed and be manageable.

Reward to Risk Ratios can be the same on 1-minute charts or yearly charts depending on the set up. However, we will get significantly more opportunities intraday than on a yearly chart. Please note that I see this more as an opportunity to be wrong as opposed to be right. The bigger picture dictates success, it’s very difficult to navigate the currents on a very small picture – CONSISTENTLY. 

The aim of trading is profits… but also longevity, the need to be here in 10 years with capital intact and growing is vital to be considered successful.

• Setups intraday take just as much work as end of day or end of week. Keeping up the pace is exhausting.

David spoke of 4 to 8 good trades a year on each market you follow.

This leads me next to a philosophical question of how many trades should we take per year? I have asked this question consistently for the best part of 20 years and it always gets a variety of answers.

My personal answer honed by time in the trenches is somewhat glib. The answer is as many as you need to deliver the business profit you need from trading. So, in its most basic form its could be as low as 1.

Now let’s say your goal was to make $1million dollars a year from trading. If your risk parameter allowed and your account was large enough, let’s say by the 15th of January your 1 trade of the year delivered you a 15 to 1 Reward to Risk and that put $1million in your trading account. The dilemma is what would you do next?

Business logic says take the year off and come back next year, human behaviour is a lot more challenging. I know many traders who can do this and spend the rest of the year donating back to the markets and having a love / hate relationship.

I don’t know the answer to the above question from my own point of view. What I can tell you is after a significant number of trades (and getting older and hopefully wiser) my preference is to take less, but more big picture setups as it allows for better planning, reflection and management.

It also allows for a better monitoring of emotions and their impact on decision making.

• The only caveat I offer is occasionally you can get in sync with markets so well you do have a hot hand and seem to be able to ride the charts like a formula 1 race driver. In cases like this I put it down to personal cycles aligning with market ones and that can be a strike whilst the iron is hot moment. The challenge is recognising when the jig is up. Refer to the Hot Hand Fallacy for some insights.

Finally, this is only one perspective, my colleagues will look to share their views as well. There is no one size fits all. All I would counsel you on is your analysis should work on any time frame and the method of analysis should be consistent across all markets and time frames.

To break down individual methods, time frames and markets is a very hard task to manage. Find your groove, experience will come but don’t be in a rush to get any experience, work hard on getting the right experience.

And lastly, I was once told there are so many good trades, why take the bad ones?

It’s a marathon not a sprint

Aaron Lynch