Quality vs Quantity of Trades

Quality vs Quantity of Trades

Quality vs Quantity of Trades

How to balance between two styles of trading

One dilemma that traders face at one point or another of their trading lives is how many trades to make. This issue comes after different experiences – new traders might feel the need to either make fewer trades, so that they learn the ropes and focus on less variables. On the other hand, novices’ approach might be to make more trades in rapid succession, so that they gather the maximum amount of experience and information from quick developments and inevitable emotional ups and downs that come with such a style.

Similarly an experienced trader might need a change of style, either to see if his initial approach is wrong, or simply as a test of a more volatile instrument that offers more peaks and bottoms.

Let’s just clarify what we mean by “many” and “quality” trades. It’s not necessarily the exact number that differentiates the two, it has more to do with the amount of time needed for a trader to follow the trade from start to finish and see how it develops without missing the important points that either make it a winning or losing trade. More experience would definitely mean that you can discern important from unimportant information, so someone who made several trades per day at the beginning, can double or triple them without losing sight of the ball.

Quality trades are those that you follow without distraction, so that you review and analyse them as they happen and later on – a trading diary is how you can keep a log for them and compare and save comments and thoughts about them. Building up a detailed description of your actions, the markets behaviour and your resulting adjustments is what trading is all about. Some might do it in their heads and rely only on memory, but that’s not how the pro’s do it.

The amount you trade with has no direct importance, although larger sums would allow you to have longer trades that don’t get wiped out by sharper moves in the opposite direction where you might have a stop loss or decide to cut the losses.

So here are some tips on how to make more trades without sacrificing their quality:

– an obvious one, but we’ll still put it in here – select the smallest amounts for your trades.

– pick an instrument that needs less money to trade. Lower margins (you can find them here) indicate that you start with a smaller hurdle to pass, more time to monitor the trade and you can make more trades with the money you have.

Another thing that you should still keep an eye on is how much pips (or ultimately – money) is won or lost with the trades. It’s what it’s all about in the end, so if you’ve tried the patient approach at first and made a modest gain, or some wobbly results, then you might need to “think less”. Vice versa – if the fast approach proved to be too chaotic and disrupting to your decision making, then perhaps a slower pace might suit you.

Demo is handy in trying both approaches, not least for the actual physical experience of rapid selling and buying, but as we’ve discussed in one of our previous articles, there are some important differences between trading with real and virtual money. If your deposit allows it – try both out and see if you can cope with the challenges that they pose – a test of patience when you focus on quality and the risk of mistakes when you put the onus on quantity.

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