I watch other traders and observe their behavior. I look to see how consistent they are, whether they are winning or losing, how happy they are about their trading, and about a hundred other factors. I like to observe.
A question I often get asked is this...
"How many trades do you take per day?" or "Will you send me at least 10 signals per day?" or "Why don't you trade in and out of the market all day, instead of taking one position?"
Here is my answer.
I only trade a few positions while others may take tens or hundreds because I am focusing on trades that I have a reasonably accurate assumption that either they will be profitable or that they will be low risk.
Commissions play a part. Each trade on Nadex has a fee attached to it. $0.90 in. $0.90 out. If the trade expires OTM (out of the money) then there is no fee. If I take 10 trades a week (2 per day), then my commissions are $18.00 roughly for the week. If I take 5 trades per day, then my commissions, for the week are $45.
On the other side, If I were to scalp in and out of the market all day, $15 here $15 there and taking on massive risk with each trade, our costs go up. $1.80 each time. 20 trades per day equals a commission cost at the end of the week of $180. This is a whopping $9,360 in commissions each year.
Here is another reason I do not take as many trades. With each new trade brings risk. Every trade is a brand new ballgame. Why would I risk losing money 100 times when I could do it 20 times instead.
Here is another reason. If I feel that I need to make a certain amount of money, instead of trading more, I will just increase my contract size instead.
For instance, If I am looking to make or lose $1000, Instead of trading $10 for 100 trades, I might trade $50 for 20 trades.
Everyone is different. There is no right or wrong way to do it. It is all on our perceptions of the market. This is just how I see it.
In my opinion, traders should be focused on making money, not trading just for the sake of trading. I am in this business to make a profit, whether it is from 1000 trades or one trade. That doesn't matter. If I can do reach the same goal with 1 trade, I will.
One could say, "Yeah but instead of taking on more risk for less trades, why not spread the risk over many trades?" Like I said, it is all on your own perception of the market. Spreading the risk is a good thing but over trading is a horrible thing that will come back to bite you if you are not careful.