Multiple Trades Per Day Makes You a Looser

[miketoll 10]

Hello,

 

first off, I'm from a Forex background. I know the average volatility of the main currencies very well and common spreads.

I often wonder how people tell me that they're doing several trades per day. Guys, please tell me how this is possible? The more trades you make per day, the smaller the timeframe you trade is. I think this makes sense. The problem with small timeframes is that the average profit and average loss decrease a lot. Compared to spread you often get a - how I call it - spread ratio worse than 5:1.

 

Example:

average pips traded before you get exit the trade on >15min chart = 10 pip (can be either a profit or a loss)

spread = 2

 

10 / 2= 5. So to speak, for 10 pips you make or loose, you always have to pay 2 pips.

 

What does this mean? This means, that you have to win 60% of the time to trade breakeven. With so many people having access to the markets and information, nobody can deny a certain efficiency in the markets. This decreases your edge a lot and everyone who's traded for a longer time knows, that a 60% edge is extremely hard to maintain.

 

BUT, to make a lot of trades (3+) you'll have to trade those small timeframes. So if you ever wondered why you're doing hard in trading, then think about this aspect. Spread is probably the HUGEST factor that separates the winners from the loosers.

 

Open to some input and ideas!

 

Cheers