It’s ironic, isn’t it?
When we start out trading, we are constantly looking for new trades and plenty of them too! Yet the more experience we gain, we end up trading less. Why is this?
I’ve identified three reasons why although you of course could add more to this list.
In our early journey as a trader, trading is so intriguing and exciting. We are both scared and hyped at the same time. We want to learn all we can about the markets through the belief that ‘knowing more’ will give us greater profits. This often translates into us over-trading, whether clicking away all day as a future ‘superstar day trader’ or even as a swing trader wanting to be in 10 open positions at a time…
Disciple is an obvious factor too. A lack of discipline (and often we don’t realise it when new to trading) will ensure we keep that trading frequency up. We continue to merrily trade away, gifting our broker plenty of commissions in the process, and more importantly ‘thinking’ by being busy that we are doing the right thing…
Finally, we reach the realisation that we can make the same kinds of returns by trading less, not more. This way, we are more relaxed towards our trading as we’ve accepted that there will be periods where we won’t be doing much but in the bigger picture, we will still develop alpha from our trading.
So whether you are a day trader, reducing your frequency from 20 trades a day to 5, or a swing trader reducing the number of markets you analyse, the process is the same.
The more experience they have, most traders end up trading less than they previously did with either no detriment to their returns or in fact an improvement in them….
Until next time…