How Often Are You Trading?

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Hello Traders.

I hope you’re all having a good week.

I talk a lot about the common misconception that trading is about machine gun firing orders off into the market, looking to blow chunks of profit out of candlesticks like a some kind of Rambo Trader slaying all before you. But I haven’t ever gone into detail about just how INFREQUENTLY you can be trading.

The thing is, when you sit down in front of that computer, your subconscious doesn’t understand the notion of ‘working less to achieve more’. You get that sense of being docile and lazy. You start thinking that you should be doing something, anything productive that will help you toward your trading goals. Because doing nothing doesn’t work. You are taught your whole life that the harder you work, the more successful you will become.

Trading doesn’t work like that. The unfortunate thing is that, even when you begin to realise that less is more when it comes to the market, your brain and internal dialogue just don’t want to listen. It’s like that annoying friend who always seems to egg you on and gets you into trouble… go on, just do it. It’ll be fun (note: if you can’t think who that friend is, then it’s probably you and you’re pretty much doomed).

Joking aside. Allowing the boredom and feeling that you should be working harder and taking more trades to pull you into the market even once can have a very bad impact. It can be the little spark that sets off the chain reaction and wipes out your account in one blissfully ignorant period of firing off orders like Rambo spraying bullets with apparent disregard into the trees, hoping to hit a target.

Now as cool as Rambo is, you want to approach trading more like a sniper. You wait until everything lines up perfectly before you take your shot.

Let’s look at day trading as the example, since that is predominantly what I do:

All the time (on twitter especially) I see people posting up the positions they are taking – long this, short this, buy the dip, sell the rally – over and over, multiple trades every day across numerous markets. It’s enough to make your head spin and I have absolutely no idea how you can be properly analysing a market and waiting for a high probability, quality setup when you’re trading so frequently.

I always go over that if you are averaging over 8% per month (averaging is the key word. Some months will be better, some worse) then you are one of the top traders in the world. If that is your returns over a year, two years, three years etc. then you are doing a very good job. Anything 4% and above per month I would consider professional.

I’m not going to get into the people who claim to be making much more, or who say those returns aren’t enough, in this post. I have made a video and also several posts showing how to identify that they have no idea what they’re talking about and are flat out lying. So that leaves us with some simple math and logic to work this out:

To return 4% per month, risking 1% per trade, you need to be finishing each week up by… 1%. So, you need to be positive by one single, solitary trade.

What about 8% return for the month? Well let’s say that once you become consistent, you decide to increase your risk to 2% per trade, which is still a very safe approach. Again, you would need to finish each week up by one single trade!

And let me tell you something else – that doesn’t mean that you need to take one trade per week. Sometimes you’ll have a whole week where things didn’t just line up perfectly. Or maybe your trades came back and took you out at break even. That is absolutely fine. On occasion, all of your perfect setups will come in your fourth week!

Once you start to think like this, and realise how INFREQUENTLY you can trade and produce professional results, then it takes a lot of the pressure off. It makes much more sense to NOT trade on Monday, Tuesday, Wednesday and Thursday because that perfect setup just didn’t come. Then on Friday, there it appears in front of you, and you take that one perfect trade.

It also means that you can spin your wheels most of the time – a win then a loss. A win then a loss. It can become frustrating and cause you to think you’re doing something wrong. But it is vitally important to reframe your thinking and bring it back to reality. You don’t need to trade often. In fact, in most instances, trading frequently can actually damage your chances of success. That is because in very high likelihood, you are over trading, seeking out trades rather than letting them set up for you.

If you find yourself getting bored or fidgety when sitting at the computer, don’t seek out trades. Find other ways to fill your time. Read a book. Watch films/documentaries. Learn something new. Anything to keep your hand away from the mouse and clicking you into imperfect trades.

I hope you’ve all had a great trading week!

James Orr