One important aspect, which the, in the end, must be considered by all traders – which trading mode to choose for yourself. Will you make one deal a day, 10, 100 or more? While the frequency of transactions can only be determined in practice, everyone trader must stop and appreciate, how much volume and how often it trades, and does he deviate, maybe, up or down from your particular style or trading system. For example, scalping style usually requires more trades, while positional traders should be more selective in their trades. Each style is different, and too large and, vice versa, too few trades can potentially harm the overall trading result.
Study yourself
Primarily, you have to decide – what style of trading do you prefer. If the need to watch every tick of the chart and every change in quotes drives you crazy, then, maybe, scalping – it's just not your style. If on the contrary, you like the high rate of trading and high engagement in market activity every second, then scalping is best for you. If you are attracted to painstaking research or trading from long-term technical levels, then you might prefer to make fewer trades and concentrate on long-term trading styles.
You may also like the idea of medium-term trading, without having to hold trading positions all day, but also not to enter and exit the market every few minutes. You take part in the main part of the movement, usually right away, how does the movement begin (you can still do your research, to find out, where these movements can occur) and then exit, as soon as signs appear, that momentum may slow down or change. With this style of trading, you can make up to several trades during the day, depending on the dynamics of the market..
Also, all traders have different restrictions or circumstances, which practically compel them (at least, temporarily) use one style or another – for example, scalping is not the preferred approach for most traders. Scalping requires extremely low commissions and spreads, since the trader will have to make many trades, mainly, with little profit, many may turn out to be zero at all, and considering trading costs, this will result in a cumulative net loss. In this way, if traders cannot provide a very low level of trading costs, then they, probably, should give up this style, like scalping. Most novice traders should reduce the number of trades, to control your overhead, but they will try to make more profit on every trade. This will entail a more careful analysis., to find out, what market instruments will move the next day, looking first of all those of them, who have reached or are about to reach major technical levels, or those markets, which will move based on economic data, news or other market factors. Traders also have other personal obligations – for example, other work, family, etc. The trading regime should not conflict with other aspects of life.
Understatement or overstatement of trading frequency
Then, a trader must be able to see, if he underestimates or overestimates the frequency of trading. In other words, Does the trader receive less potential profit?, because he is not ready to enter the market, when he sees a trading opportunity, or makes useless deals, wasting money on excessive trading costs. If a trader underestimates the frequency of trading, then he. probably, will often reproach himself with words: “my trading system was giving an entry signal, why didn't i do it!” This – a clear sign of a violation of the frequency of trading in the direction of underestimation.
Overtrading may be harder to spot, but if the trader consistently makes only a few dollars in excess of the overhead, or makes random transactions using unverified methods, then it probably exceeds the trading frequency. Another sign – it is too early exit from profitable traffic, or placing a stop order too close to the entry price, which prematurely removes the trader from a potentially profitable position. This will lead to an increase in the frequency of trading and, respectively, increase in trading costs.
In both cases, the trader should structure the trading plan in this way, to insulate yourself from such tendencies.
Using a trading plan
Any trader must have a trading plan. Market entry and exit should not be random. There must be a valid reason for every trade, backed by a trading plan. Maybe, if a trader overestimates or underestimates the frequency of trading with a plan, this plan needs correction. Overtrading, maybe, that a trader should make his entry and exit criteria more stringent, to make it more difficult for the trading system to generate reliable signals. When we add more criteria, which must be fulfilled to conclude a deal, we make fewer deals, but probably – these trades will be more consistent and more profitable, although not guaranteed.
If a trader underestimates the frequency of trading, then probably, that there is no clear trading plan, and he only watches the market, skipping trading opportunities. If he really has a plan, then his current criteria for entering the market, probably, too tough. If the trading plan does not allow the trader to make money on major movements, then he needs to adjust his trading system accordingly.
Don't Discard Promising Trading Opportunities Out of Fear of Losses. Develop an attack plan for the market: what is going to happen, for you to enter the deal, and what – to close the position?
Conclusion
All traders, no matter, how often do they trade, must have a trading plan. After that, how is the plan worked out, we must evaluate, whether our trading frequency is overestimated or underestimated as part of our plan. Based on these results, we can change our trading system, to meet our needs and. probably, increased our profitability. If we exceed the trading frequency, then we can make our criteria for entering and exiting the market more restrictive. When you underestimate the frequency of trading, we need to simplify our terms of business, to take advantage of potentially profitable market movements.
