Whether it is stocks, futures or foreign exchange, funds usually flow from active traders to those who are patient. Losers like to trade frequently during the day, while experts prefer day trading.
1. It is difficult to make a profit through frequent trading. The transaction costs are too high, and the handling fees and slippage costs make your strategy less stable.
Frequent intraday trading is difficult to make a profit in the long run, because the intraday market is limited, the transaction fees are constantly increasing, and there are various factors such as slippage in the actual market. The end result is that the money you earn in such a small-scale intraday market is simply not enough to cover your losses and transaction costs.
Frequent trading will make you frequently enter and exit the market every day in the volatile and disordered market. You may earn more or less income, but each of your orders will only make a small profit, and it is difficult to make stable profits in the long run.
If you want to achieve stable profits, you need to cut losses and let profits run. If you let profits run, you can't trade frequently. Don't leave when there is floating profit, don't stop when you see good, hold on to profits, bear a certain profit retracement and let it run. Don't hold on when there is a loss, stop loss and exit as soon as possible. This is the correct way to trade.
2. How to determine whether you are trading frequently depends on whether your trading logic is correct and whether every order you make is in line with your trading system.
Every trader should give himself a clear positioning. What kind of market do you want to catch? Where does your profit come from? There are three thousand rivers, but you only need to take a scoop. How big should your scoop be? This is up to you to decide.
For example, some people make an hourly trading system, but they trade 10 or 20 times a day, which is obviously frequent trading.
If you have your own trading system, and you strictly follow your own trading rules for every transaction, you set a stop loss after entering the market, and leave the market if you are wrong, and try to let the profit run if you are right, and your risk is controllable, then in fact your trading is not considered frequent trading. The so-called frequent trading means that you violate your own trading system and deviate from those orders outside your trading system. This is your own random trading.
3. The fundamental reason for frequent trading is the lack of clear trading rules.
Many novices like to make frequent short-term transactions. This is due to human nature. Short-term transactions are effective quickly, and people like to pursue short-term huge profits. They are afraid of missing every trading opportunity, and want to make up for the loss if they lose. The more they lose, the more they do it.
People's emotions are easily affected by the market and other people. Without trading rules, it is easy to trade emotionally. Operations will become chaotic, leading to frequent trading.
Human greed is also one of the reasons that lead to frequent trading. In the trading market, opportunities are everywhere. With a greedy mentality, it is difficult for us to distinguish whether it is our opportunity. Most people are afraid of missing opportunities, so they would rather lose 9 times than miss that one profit opportunity. In the face of high profits, people forget the risks and choose to trade frequently.
If you want to avoid frequent trading, you must establish clear entry rules, exit rules and capital management rules as early as possible, combine them into a trading system of your own, and then trade mechanically according to the trading system.
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