Less Is More

Rethinking Trade Frequency

Trade Frequency

One thing I’ve noticed in traders is an inverse correlation between trade frequency and profitability…

Meaning, traders who trade less frequently are more likely to be making more.

That’s a generalisation of course and there are always exceptions to any generalisation. But honestly, if you asked me to back a trader with £500k of my own money and told me nothing other than the number of trades they took a week. I would back the less frequent trader every time.

But before I p1ss off the day traders (I’m a day trader too!) let me qualify that…

Each time you trade you pay a cost. Spread, commission, a combo of both, these days it’s small but it’s still a cost. And by the very nature of hyper short-term trading, your profits are going to be small too.

Your cost to do business is a far more significant % of your income.

Then there’s the fact that the market only has so many rotations in a day. The rest is just noise, and the more active you are the more likely you are to be caught in noise.

What does that mean for you?

Trade less.

Seriously! Try it.

Slow things down.

There’s no need to try and catch every single tiny rotation.

Look for the bigger moves. For you, that might be 10 minutes or it might be 4 hours. And you might be reading this thinking “Rubbish! I trade a lot and I’m killing it”. If that’s you then great, double down on what’s working!

But if you aren’t where you want to be, then perhaps consider a simple change of reducing your trade frequency.

There’s no need to play the game on hard mode.

For many traders, simply trading less turns things around very quickly.

Today, audit your trade frequency. Could you trade less? How could you put into practice a slower way of trading?

Trading a lot is fun, but a healthy equity curve is more fun…

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Jim Simons

One trader who really doesn’t need to slow things down is Jim Simons – Founder of Renaissance Technologies a hyper-successful quant fund.

Here’s a good podcast speaking to the author of The Man Who Solved The Markets, a book all about Jim Simons and his incredible returns.