The reality of "over-trading"

[loyek590]

This seems to be YOUR statement du jour, so back at cha...

The "market" does not offer ANY odds. YOU, the trader, assign "odds" based on YOUR interpretation of the market. As Tony Robbins said, "Things do not have meaning. We assign meaning to everything." And that is where your system comes in. You have either assigned a meaning (with odds/probabilities) to what your senses are encountering or you have not. You are either acting on a what you have assigned meaning, or you are acting without an expected (likely) outcome. IT really does work that way.

sorry about the phrase du jour, you got me, I'll try to mix it up. I enjoy talking about the market and trading and gambling. All I should say is if I look at a craps table and look at the market I'll take the market. Because no matter how much those craps bettors bet, they can't make it roll even a six or an eight. But once those traders and investors and gamblers start betting on the market, they can make it go very high.

 

[xandman]

Gambling is an excellent analogy.

Like gambling or any business for that matter, over trading in a high probability- low return strategy might be necessary as a loss leader so that your low probability-high return strategies can benefit from economies of scale and improved cost structures.

Unlike gambling, there will be outside forces that affect the state of the game. So, sitting on your hands is also a very important skill.

That being said, does anybody know of futures brokers that will give commission discounts for futures options if you make the futures commission tiers?

 

[JTrades]

The "market" does not offer ANY odds. YOU, the trader, assign "odds" based on YOUR interpretation of the market.

Yes, we are the proprietors of our own casinos and we must invent the games before we begin to play.

 

[AAAintheBeltway]

I hear many posters on this site warning others about the pitfalls of "overtrading", or lamenting their own struggles with "overtrading". I want to take this opportunity to remind you that if your strategy has an edge, you should trade it as frequently as possible. That being said, if your strategy does not have an edge, trading it infrequently will not compensate for the uselessness of your strategy. No amount of bankroll management will overcome this.

If your strategy produces increased losses with increased trading, the problem is NOT that you are overtrading. The problem is that your strategy is flawed, and you need to stop using it.

Playing fewer hands of baccarat or blackjack will not reduce the house edge. You will just reach your negative expectation more slowly. The same applies to trading.

What you say may apply to a pure system trader, but unless you have access to HFT tools, you are very unlikely in any event to be able to make money over a meaningful period of time in the ES as a system day trader.

For a discretionary trader, it is absolutely essential to limit the number of trades. The reason is threefold. One, in a good market, you want to hang onto winners as long as possible. Taking quick profits with a plan to get back in sounds good, but it is usually sub-optimal in a good market. In a lousy market, like we have now, it is essential to avoid getting chopped up. You have to have filters, either quantitative or qualitative, and apply them rigorously to avoid bad markets.

The third reason has been commented on above. There are typically no more than three or four decent setups a day. Some days there are none. Losers worry they will miss out. Winners wait for the perfect setup.

 

[tiddlywinks]

That being said, does anybody know of futures brokers that will give commission discounts for futures options if you make the futures commission tiers?

That MAY be negotiated. I trade only a few options so I can not be certain.

Try these... Referral not necessary... these guys run the shops.

Pratik Pratel at TF4L (Dorman) http://tradefutures4less.com/
-or-
Craig Ross at ApexFutures (OEC/Gain) http://apexfutures.com/

 

[xandman]

Yes. It seems you have to negotiate. TF4L's online help said futures only. I know James Broad who works for Craig. Nice folks. Thanks again.

 

[Handle123]

I hear many posters on this site warning others about the pitfalls of "overtrading", or lamenting their own struggles with "overtrading". I want to take this opportunity to remind you that if your strategy has an edge, you should trade it as frequently as possible. That being said, if your strategy does not have an edge, trading it infrequently will not compensate for the uselessness of your strategy. No amount of bankroll management will overcome this.

If your strategy produces increased losses with increased trading, the problem is NOT that you are overtrading. The problem is that your strategy is flawed, and you need to stop using it.

Playing fewer hands of baccarat or blackjack will not reduce the house edge. You will just reach your negative expectation more slowly. The same applies to trading.

I don't think you have a clear understanding of OVERTRADING at all. Overtrading has zero regards to strategy, it is a trader that is undisciplined period and emotional, regardless of whether he has an untested or minimal Trading plan, it is "they" who get all caught up in fast movement of price or series of losses and decide on either next signal to add more contracts or no Trading plan and trade from the hip to trade whenever price moves quickly and by then it is too late, both are unsound practices.

I think the debate is, "Should you cut back during drawdown?"

Cutting back during drawdown has nothing to do with Overtrading either, if you having a drawdown and unclear what to do, you don't have a good Trading Plan as this would have been addressed in the development of building your system.

nobody is worried about commissions or the spread or even taxes when it is going good.

This is absurd, when you don't care about what you will pay for fees and spreads, you will never trade 50 lots. One dollar difference in fees per trade times time 50 lot times 10 trades a day is $500 a day times 50 weeks is $25,000.

+1

Not to be forgotten are those who arbitrarily limit the number of daily trades, based on nothing! I can't help but chuckle reading the posts married to the idea of making one or two trades a day and be done. As if they know what and when the market will be offering, let alone executing flawlessly to extract.

I finish at certain time each day so you can also say same goes, but I know based on 14 years of data broken down into 15 minute increments where the blunt of the profits are for me. I want to start having a better quality of life than go for peanuts. Best time to trade that has greatest volume.

 

[chrisjs87]

I don't think you have a clear understanding of OVERTRADING at all. Overtrading has zero regards to strategy, it is a trader that is undisciplined period and emotional, regardless of whether he has an untested or minimal Trading plan, it is "they" who get all caught up in fast movement of price or series of losses and decide on either next signal to add more contracts or no Trading plan and trade from the hip to trade whenever price moves quickly and by then it is too late, both are unsound practices.

No that doesn't make any sense. The term "overtrading" implies that a higher frequency of trading results in lower profits. The purported solution is to trade less("Smart"), trade higher time frames, etc. It's all a mind game to delay reality from sinking in.

Trading emotionally, or without any sort of basis for making your trades is also certainly bad form, but that doesn't necessarily have anything to do with trade frequency.

 

[loyek590]

I don't know who you are talking to, I trade my strategy come hell or high water and it trades a lot. But I can just look at my ib trade log and if it is over two pages, I don't even have to look at the account balance, I know it was a losing day, since I never take profits.

But apparently you have come to some new revelation that you shouldn't be concerned with over trading and you needed to post that to reaffirm your new belief. Hope that works out for you.

 

[chrisjs87]

I don't know who you are talking to

But apparently you have come to some new revelation that you shouldn't be concerned with over trading and you needed to post that to reaffirm your new belief. Hope that works out for you.

When you quote someone. It tells you in the upper left who is being quoted. It also copies the quote from the other person. and shows you. who is talking. to who.

Oh and also, this is a forum for posting about trading, so from time to time you might find that people are posting stuff and things about trading. Hope that doesn't confuse you too much.