How many trades do you average (daily)?
ytd, I average 1.45 trades per day, and my broker Scottrade told me that I trade often. This rep's remark made me curious as to how often other people trade.
Note: I am outperforming the S&P ytd, so I'm not looking to increase or decrease the # of trades I do - I'm not going to fix what ain't broke. I'm just curious as to how often people on yahoo answers trade. Thanks!
Comments
1.45 trades daily shouldn't equate to only 12.7% portfolio gain after almost seven months. You're clearly putting yourself at risk from over-trading.
I don't mean any harm by saying this, but, that's like short-term trading for a long-term gain, meaning that you have a very low success rate, with a lot of losing trades. You should consider cutting down on the trade count.
We can do some calculations here (all approximations):
There are (cumulatively) 250 trading days per non-leap year. Divide that by 12, and you get approximately 21 (20.8) trading days per month.
It's July currently, which is the seventh month. If we assume it's the end of the month, you would've already traded 147 days. For 1.45 trades daily, you would have made approximately 213 (rounded) trades to date. Divide this by two (I'm not sure if you meant trades as in buy and sell, or just the entire position itself, but we'll assume the former), and you have 107 (rounded) trades.
Let's suppose you started with $10,000. If your YTD return is only 12.7% (we'll say 13%), you gained $1,300 after seven months. This means that each trade netted you only $12.15, or way below 1% daily return (exact number is 0.001% daily return).
Short-term traders should be getting at least 1% or more per trade, or else it is not worth the risk to trade frequently.
If we assume a short-term trader makes even 0.5% per day, that person would make $50 a day. Multiply that by 107, and you get $5,350, or 53.5% return YTD. $1,300 return is less than a quarter of what a true short-term trader makes.
However, those values assume a 100% successful trade rate.
Short-term traders always strive for a success rate of at least 70% (the commonly accepted minimum success rate). Factoring this in, if we assume you had a 90% success rate, and that each trade yielded the exact same, you would only have $1,300 x 0.9 or $1,170. The true short-term trader, even with 70%, would still have $3,745.
You're earning less than a third of what a successful short-term investor makes, which places you at extreme risk unless you can maintain a very high success rate, or, go for more quality trades (less trades, but larger gains).
The average long-term investor makes a portfolio return of anywhere from 15-30% per year. Seven months would range from 8.75% to 17.5% YTD. Your YTD portfolio return is within that range, effectively saying that you're only earning a long-term gain, yet, trading short-term to gain it. Long-term traders average below 30 trades or so per year.
With all that said, you should consider revising your trading strategy to go for less frequent, but higher quality trades. That Scottrade service rep is right in saying that you're trading very frequently. The problem isn't the frequency of the trades, but the fact that you're making too many low-profit, extremely underperforming trades. That is not something to be proud of.
I'm not going to try to calculate how many cents (if there even are any) that you gain per trade, however, you need to realize that profit is always directly proportional to risk taken. But, as you can see, your numbers clearly don't show that.
You have a few good trades that yield a lot, but way too many bad or underperforming trades. This is not a healthy habit to be in, and over the long-run, those bad trades will eventually wear your capital down.
Sure, you could place stop loss orders to dump a position after a little bit of loss, however, over the long-run, eventually, you might get hit by some huge slumps that occur within seconds, which trigger from your stops. (Although, you could use stop limit orders, I suppose.)
Anyways, to answer the main question, I make anywhere from 2-5 quality trades per day (it depends on how many stocks I find daily that actually look good). I don't go for the small-fry gains. I make trades that I know will return 5-10%, per trade (although, this is due to margin, so the profit potential is increased; if we assume a standard account, it would be 1-5%, for my brokerage).
On Thursday, I bought in on AU, EXK, and NOR prior to market close. Yesterday night, I bought in on BX and UGI for Monday. I have a price target of $35.00-$35.20 for BX, and $50.00-$50.30 for UGI on Monday, roughly by the afternoon.
Its depends what Pokemon it is. Some days I will see a machoke and I would trade my gravelled for it. Other times I would see an arceus but it would be asking for a celebi or a deoxys. Then I wouldn't trade. Usually I trade 4 times a dau
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