How Active Should You Be?
By Cliff Clark
I think one of the biggest issues “all” traders have is trying to figure out how active they should be. I'll address active trading (day trading) here since I believe most of my readers are active traders. But how active should you be? One trade a day, two, maybe fifteen? Realistically, how many do you need to take to make a living at this game? It's probably less than you think and a lot less than you thought when you started out.
It's something you have to consider when you are building your trading plan. When advising new traders on starting their trading plan I advise them to start with one strategy and then add others as they master each one. This allows them to learn each strategy without becoming overwhelmed. The down side of this method is that it will limit the number of trades the trader will be able to find. However, in the early stages of development when one is learning strategies, management and everything else that does along with trading I think less is more.
Starting out with fewer trades means fewer losses which in the early stages can be a drain on a traders confidence. The goal early on should be education and developing your trading business not making profits. That is true in any industry.
Once you have become proficient and have a viable trading plan the number of trades you take each day will be dictated by several things including:
Your trading plan
Your trading capital
Your skill at managing positions, how many positions can you handle at a time.
Over time, as your plan develops and you gain experience at managing positions and your capital grows you will find the right number of positions to trade. For me, over the last eight years for day trades I average about 2.3 trades per day. That does not include swing and core trades which I trade in separate accounts. Be smart, look for quality over quantity.
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
