Look at the net result of his 15 trades.... Compare that to my 3. Who came out ahead?
Average # of trades per day
- Thread starter drukes
- Start date
I agree with you.
People should be more selective when entering a trade. This will result in less trades, but better ones.
AJ2014 had 13 losing trades out of 15 trades, that is 87%! He also had 6 consecutive losses in the same direction. If you go short 6 times in a row, and lose each time, you should understand that there is a problem that needs to be solved first before continuing to trade. This means that he has a problem with the direction of the market.
If he would be more selective he would avoid losses, that means improvement of performance. By being more selective probability that he will take a real good signal will increase too, and will raise the profit per trade as the move will be bigger too.
Find out what the ideal waves are. And from these waves you can count the number of trades you should do. I will take as example the ES.
First some observations that I made personally:
I added 2 charts: first one is 15 minute chart and second one is the same data in 5 minute chart.
In the 15 min you see all the big moves that you should try to catch in a consistent system that works in every different type of markets. Very difficult. If you can take these moves you will make a lot of money. So no need to trade microscopic and very stressful on very small timeframes or even the ticker tape. Even tickcharts are not needed.
In the 5 min chart you see the tops and bottoms from the 15 min chart, but also more detailed the evolution of every 5 min wave. Between every top and bottom (from the 15 min chart) you see a number of intermediate tops and bottoms that make waves contrarily to the 15 min wave. You see clearly that all these contrarily moves have very little potential and reverse quickly. If you try to catch them you will see in real trading that these contrarily waves in the long run will make little or no money. They can even be losing all together.
There are 17 extra trades (more or less) that can be generated, but the questions are:
First some observations that I made personally:
- Nobody can pick the top or bottom of every wave consistently so a part of every wave will be already lost. If you miss 1 point from every top and bottom, you need already a wave bigger than 2 points+commission before you can make profit. And only missing 1 points is very optimistic; most people miss much more. But you should also make some profit, so the wave should be calculated on the specifics of your system. The exact minimum you need depends from your win /loss ratio and from the average loss or profit per trade. Conclusion: the waves should be big enough to make profit.
- It is clear that a well performing system needs waves of roughly 3-4 points. That leads to the conclusion that trading on very short timeframe will not be a good idea because the range will be many times not big enough.
- If you watch in 15 minute charts the waves of the day, you will see that you will have all the big moves with enough range to make money. Smaller timeframes will give also small waves within every wave, which makes it more difficult to trade because they will disturb your system. These small intra waves can produce signals opposite to the 15 minute waves, but they will not have enough potential to make money. These intrawaves are what I call noise. Noise is useless for making money and will only disturb you.
- The big waves are what I call the trend. You should never trade against the trend for several reasons:
- The waves with the trend are much bigger than the waves against the trend. That's logic because that's why there is a trend. If they would be smaller the trend would be in the other direction.
- Waves with the trend move in genera l much faster than waves against the trend. So going against the trend has a high risk because the profit is limited and the wave in general reverses quickly in the direction of the trend again. So more risk because you have to react quickly and much smaller potential for profit.
I added 2 charts: first one is 15 minute chart and second one is the same data in 5 minute chart.
In the 15 min you see all the big moves that you should try to catch in a consistent system that works in every different type of markets. Very difficult. If you can take these moves you will make a lot of money. So no need to trade microscopic and very stressful on very small timeframes or even the ticker tape. Even tickcharts are not needed.
In the 5 min chart you see the tops and bottoms from the 15 min chart, but also more detailed the evolution of every 5 min wave. Between every top and bottom (from the 15 min chart) you see a number of intermediate tops and bottoms that make waves contrarily to the 15 min wave. You see clearly that all these contrarily moves have very little potential and reverse quickly. If you try to catch them you will see in real trading that these contrarily waves in the long run will make little or no money. They can even be losing all together.
There are 17 extra trades (more or less) that can be generated, but the questions are:
- how much profit will they delivered ?
- how is this profit compared to the 5 trades from the 15 min chart?
- how much energy and stress for how much extra profit (if there would be extra profit...)?
Attachments
In addition to # of trades, it is more important to think about daily expense and accumulated yearly expense and yearly tax.
Suppose we have a seed of 10K or 100K, find out estimated yearly comm+tax for one year.
Tell me simulated expense and ProfitBeforeExpense, with TaxRate=Expense/ProfitBeforeExpense.
If ProfitBeforeExpense= 4K (40K) and Expense 2K(20K) then TaxRate=50%.
And you have now seed of 12K(120K) for the second year.
This kind of compounded 20% is similar to the 45 years record of Warren Buffets, if he does NOT lie.
Of course keeping 20% for 45 years gives you 4000 times of the original seed.
I guess no one made more than 4000 time for his life. If there is, tell me now.
Suppose we have a seed of 10K or 100K, find out estimated yearly comm+tax for one year.
Tell me simulated expense and ProfitBeforeExpense, with TaxRate=Expense/ProfitBeforeExpense.
If ProfitBeforeExpense= 4K (40K) and Expense 2K(20K) then TaxRate=50%.
And you have now seed of 12K(120K) for the second year.
This kind of compounded 20% is similar to the 45 years record of Warren Buffets, if he does NOT lie.
Of course keeping 20% for 45 years gives you 4000 times of the original seed.
I guess no one made more than 4000 time for his life. If there is, tell me now.
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Therefore, like IB charging $1 for each execution, there might be another new broker
1) charging no-limit Pizza style, e.g. 1% fixed comm of seed (no more than $100 with seed of 10K), everyday
2) charging first 100 trade for each $1, and thereafter $0.5.
Depending on the comm structure for each broker, your strategy WILL BE CHANGED. Some trader prefer paying $100*240=24K one time at Jan 1 upfront, and no more paying until Feb 31.
I would say "The more you trade, the more chance you will be as a loser in the long run".
Try to track previous comm+tax paid, and calculate future estimated yearly expense. Probably that is essence of successful trader.
In other words, TaxRate should be less than 50% hopefully. Some stupid sucker shows TaxRate bigger than 100%.
Trading is fighting against TaxRate, rather than fighting against other participants.
1) charging no-limit Pizza style, e.g. 1% fixed comm of seed (no more than $100 with seed of 10K), everyday
2) charging first 100 trade for each $1, and thereafter $0.5.
Depending on the comm structure for each broker, your strategy WILL BE CHANGED. Some trader prefer paying $100*240=24K one time at Jan 1 upfront, and no more paying until Feb 31.
I would say "The more you trade, the more chance you will be as a loser in the long run".
Try to track previous comm+tax paid, and calculate future estimated yearly expense. Probably that is essence of successful trader.
In other words, TaxRate should be less than 50% hopefully. Some stupid sucker shows TaxRate bigger than 100%.
Trading is fighting against TaxRate, rather than fighting against other participants.
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Completely wrong.
You have to fight first against participants. Only if you can make money you will have to fight against taxrates. Taxrates are a result of profit, and profit is a result from fighting against participants.
In US, of course, roughly 20% to 48% percent for the yearly profit. But above many traders has lot of commission. So I mean thinking about possible sucker who pay comm+tax more than his ProfitBeforeExpense.
There is good research paper, regarding percentage of winners in the long run.
http://faculty.haas.berkeley.edu/odean/Odean CV.pdf
“Just How Much Do Investors Lose from Trade?” with Brad Barber, Yi-Tsung Lee and Yu-Jane Liu, Review of Financial Studies, 2009, Vol. 22, 2, 609-632.
“Does Online Trading Change Investor Behavior?” with Brad Barber, European Business Organization Law Review, 2002, Vol. 3, 83-128.
"The Internet and the Investor" with Brad Barber, The Journal of Economic Perspectives, Winter 2001, Vol. 15, No. 1, pp. 41-54.
"Too Many Cooks Spoil the Profits: The Performance of Investment Clubs" with Brad Barber, Financial Analyst Journal, January/February 2000, 17-25.
"Are Investors Reluctant to Realize Their Losses?", Journal of Finance, Vol. LIII, No. 5, October 1998, 1775-1798.
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In the long run, most traders should pay comm+tax as much as double the price of his home.
That is why most frequent traders do NOT have home.
Only less than 10 percent is winner in 40 years (e.g. 20 to 70) if he keep frequent trading.
It is true in many countries, based on the above research papers on US and Taiwan.
Of course, paying lots of tax and commission is definitely patriot, as they encourage trading.
Suppose one million participant with 100K seed each and 200K comm+tax in his entire life for 40 years. (5K per year = 5% of the original seed)
Who is going to be a winner? VERY FEW.
Even if you are a big winner many years later, you should pay almost 50% to IRS, in addition to yearly comm.
Personally I track all the comm and tax, in my whole life.
That is why most frequent traders do NOT have home.
Only less than 10 percent is winner in 40 years (e.g. 20 to 70) if he keep frequent trading.
It is true in many countries, based on the above research papers on US and Taiwan.
Of course, paying lots of tax and commission is definitely patriot, as they encourage trading.
Suppose one million participant with 100K seed each and 200K comm+tax in his entire life for 40 years. (5K per year = 5% of the original seed)
Who is going to be a winner? VERY FEW.
Even if you are a big winner many years later, you should pay almost 50% to IRS, in addition to yearly comm.
Personally I track all the comm and tax, in my whole life.
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