Here's a little thought experiment for active traders.
Suppose you could only make two trades per day and you could only trade at a maximum of 2x leverage.
Once you made your two trades, you were done for the day.
What would happen?
You would have to be very selective in your choice of trades. That means you would have to be extremely patient and disciplined.
You would have to concentrate on identifying the largest moves in a day. That means that you would have to be very market focused, emphasizing only the best and most relevant market data.
You would have to ride your winners and frame each trade with very good risk/reward, because you wouldn't have further opportunities to trade during the day.
You would have to trade only when patterns in the market hit you between the eyes, giving you the greatest possible confidence.
It's all supply and demand. If the supply of possible trades is reduced, each trade becomes more valuable to the trader.
Might many of us discover who we are as traders--what we do best--if we strictly limited the number of trades we placed? At that point, we'd have to be the best we could be, because we wouldn't get another shot at markets.
Perhaps it's true of life itself: awareness of our limited time on earth makes us value each day more, prodding us to live it to its fullest.
Without perceived scarcity, any commodity loses value.
.
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13 comments:
we're mortal unexpectedly...
unfortunately, few of us learn the lesson of time until we've aged a bit
You spoke my mind. This is exactly what I have been doing for the last month except that I had set the limit to 3 trades per day.
I read one of your earlier articles about over trading and it immediately stuck me that that's exactly what I am doing. Not only does it waste money in commissions but also makes me very edgy and stressed as I try to find and scalp things that are not meant to be.
Essentially I was getting whipsawed and my broker was getting rich with all the commissions especially more so with option trades.
With this 3 trade per day limit, I have become more patient and take only the 3 best opportunities in a day...
Guess what, I have become more balanced and profitable :))
Excellent post!!! Kudos
I totally agree. When i did bad in year 3 of my career, i went to one market, then one trade per day, then one per week! And i still lost money! But as you say, i learned alot and found my speciality. To this day i don't trade more than 3 per day max. but thats just me. each to his own
AMEN! Thanks Brett.
A friend told me once to trade like I was paying a broker top dollar each way. It was good, like wise advice.
brett, I have (am) spent considerable time restricted in trades as you describe. This has considerably accelerated learning as you suggest... and kept me out of big trouble. IMHO.
I need an exercise like this, thank you so much doctor.. I am overtrading now ,I Will try it next week.
Dr. Brett,
Your posts are great. You described exactly the process I am trying to perfect. I wonder at times if I should not just scalp many trades a day instead. I read where the most profitable traders do make a lot of trades. I am programming some personal indicators and alerts (in esignal) to help me find those optimum situations for entry. The jury is still out on this.
What I can say for sure however, is that I have learned more about my self through this process than from any other life experience. I sometimes wonder if trading is more valuable as a therapy process than as a money generation source.
jgr
What a fantastic, down to the nuts and bolts thought......and one that is genuinely helpful...
Wow. Thanks Dr B.
I dont think that one rule will work all the time, maybe its a good idea to have when overtrading. Some days you have more opportuneties than others, so why not be foucused on the important things in trading: support-resistanse, advance-decline?
Focus on direction of trends, suport/resistance, and advance/decline will do a hell of a lot! One rule all the time do not work all the time, because things change, but the three important thing above, never change.
Try working on those three areas, after some knowledge and experince thats all you need.
Excellent post. I significantly reduced my trade volume and my profits increased tremendously. On trend days I limit myself to 3 trades/day and on range days i limit myself to 5-10 trades/day.
Dear Dr. Brett: Thanks very much indeed for your advice. Please keep on helping us.
All the best
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