Saturday, November 25, 2006

Am I Playing Enough?

Some traders seem to believe that the key to fortune is more trades - they can't get enough trades going. That might be a wrong idea.

Using my filtering website - - I set up a test that output results of different levels of trading activity. I used 1, 2, 4 and 25 a day maximum with a 5% profit exit and 10% stop loss. I still held only 4 days maximum. Here are the results of a 77 day trading period:

Trades Per Day/Portfolio - Amount Profit

1/4 - $9746
2/8 - $8933
4/16 - $6227
25/100 - $629

OK - same trading account - same trading period - same filter being used to select candidates. The only difference being the number of stocks that can be traded and the number of stocks in the portfolio.

Because the raw amount is the total profit at the end of the trading period it is obvious that 1 or 2 trades per day will yield the best results.

Now remember that there are many different ways to slice the number of trades you are in at any one time but this seems to be saying that having fewer is better.

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