We have been talking about frequent transactions, jokingly saying that we can't control our hands. As for this aspect, it is always summarized into self-discipline or trading plan, which is logically correct, but the framework is too large and not specific, so many "patients" still have no way to deal with this problem.
This time, let’s discuss in detail the transaction frequency and the two points behind it that we should pay attention to.
First point: choose
The first point is to be clear that the trading frequency is a choice, and what factors will affect the trading frequency under the choice. I have personally summarized a few points——
①The number of varieties in the library.
What is a variety library? If it is not easy to understand, then you can put it another way, everyone who plays games should know the concept of "hero pool".
Yes, in short, the variety library is how many varieties you have mastered based on the familiarity and understanding of the varieties.
There are many traders who do not have a stable variety library when they are trading.
Turn on the computer, browse through various varieties, see which varieties have trading opportunities, and then do it.
And what about the variety library?
For example, there are 4 varieties of ABCD in my variety library. When I see that XYZ has opportunities, but they are not in my variety library, so I cannot trade them.
If I want to do XYZ, then I first need to understand XYZ's attributes, trend characteristics, etc., to get familiar with them, and then incorporate them into my variety library.
In short, the variety library can set a limit, no matter whether the variety library is 7 or 10 or 20, if it exceeds the range of the variety library, OK, stop. This is not just because of unfamiliarity with the species, but also involves the problem of probability dispersion.
Probability dispersion is a big topic, and I am not going to expand it here. Briefly describe, have you ever experienced such a situation, such as two varieties of trading opportunities at the same time, you choose one of them, but the variety you choose has not gone out of the market, and may not even move much; Not to mention how happy the market is going. This is the case of probability dispersion.
After having a stable variety library, make trading plans for the varieties in the variety library every day, and which varieties may have trading opportunities that day, then put them in the list of key concerns for the day. Wait until an opportunity arises, and then observe whether the opportunity fits your own trading system. If yes, enter the market; if no, continue to wait.
In this case, can the transaction frequency be effectively reduced?
②About the nature of your transaction.
To put it briefly here, first confirm whether you are a short-term, mid-term, or long-term trader.
The nature of each transaction is different, and the cycle of transaction decision-making is different, so the frequency of opportunities brought to you must be different. For example, the trading frequency of long-term traders must be much lower than that of short-term traders.
③ Different trading styles will also affect the trading frequency.
What is a trading style? For example, whether the opening conditions or entry conditions of your trading system are tightened or relaxed, that is, whether your personality is stable or aggressive.
Therefore, the trading frequency is a choice, and the trading frequency can be changed by controlling the product library, controlling the nature of the transaction, and the formed trading style.
The second key point: the cost behind the choice
The second point is that a transaction is a choice, and every choice will inevitably bring its cost.
There is no one-and-done thing in trading. Since each choice will inevitably bring costs, then analyze the benefits of high frequency and low frequency, and what kind of costs it has.
①First analyze the high trading frequency. Its advantage is that within a unit of time, such as a month as a statistical unit, there may be many trading opportunities, and more trading opportunities represent more potential opportunities to make money.
What is the cost of high transaction frequency?
That is, it can bring you potential losses, that is to say, once the trading frequency is high, there may be multiple consecutive stop losses.
For example, if you trade 100 times a month, assuming a 60% winning rate, this should be relatively high, that is, 60 times of profit and 40 times of loss. Among these 40 losses, is it possible that the luck was particularly bad for a period of time, and the loss was stopped 15 times in a row? There is no doubt that this will definitely happen, although the probability is smaller. And these 15 consecutive stop losses will also lead to more problems. Therefore, while choosing a high frequency, whether you can bear the consequences of 15 consecutive stop losses needs to be considered. Because this is the cost of high transaction frequency.
②Let’s analyze the advantages and disadvantages of low transaction frequency.
The advantage is that the trading frequency is relatively small, so the number of consecutive stop losses is relatively small. For example, if the trading frequency is low, there may be only 10 orders in a month (rather extreme), then there may only be five or six consecutive stop losses. The psychological pressure has been reduced a lot.
In addition, it is not easy to miss trading opportunities, because there are few of them in the first place, and my pressure to watch the market is relatively low, so when a trading opportunity comes, the probability of grasping it will increase.
Why does the probability increase? Because the trading frequency is low, it must mean the screening of opportunities, or in other words, the probability of making a move will naturally increase.
What is the cost? It is to go through a long waiting period, such as no trading opportunities for two or three days, or even no trading opportunities for a week or two if your trading frequency is lower. You must be patient, control your hands, and not rush in blindly. The psychological endurance brought about by this kind of waiting is also one of the costs.
In addition, there is another type of trader who is quite special and belongs to the situation of non-stick. On the one hand, the trading frequency is high, but more stop losses and more retracements are unacceptable. On the other hand, he can't accept lowering the trading frequency, waiting for trading opportunities for a long time, watching the market without operating. In this way, I can't do any style, and in the end I can't find a trading method that suits me after I exchange it.
As far as I am concerned, I am generally a swing trader. Although I occasionally do some intraday swing trading, the overall frequency is actually low. But I didn't start out like that.
When I first entered the trading market, the trading frequency was very high.
Mainly because of the temptation from two aspects, one is the bonus and the other is the commission.
I don’t need to say much about the bonus, if you meet XX hands, you can get the bonus. Was it naive of me to think there was such a good thing? Then you can't give up, so you sell when you see a trading opportunity, and finally? In the end, the bonus was obtained, but the money lost was several times the bonus...
The commission came shortly after the bonus incident. After the bonus incident, I just thought that my trading skills were not good enough, so I was tempted again by the platform’s so-called commission after I made up for it. The process was basically the same. The account has the heart to cry.
Look, my trading frequency is very high, but, there are no rules, or this kind of high-frequency trading is not an opportunity that occurs in my own system; I want all opportunities, all of them are mine, and the result is that I have nothing Not caught. And I was a newcomer at the time, and the pressure of continuous losses brought about by high-frequency trading was conceivable, and even my hands trembled after placing an order. This is a typical ignorance of the cost behind the choice, and this cost was unbearable for me, who was still a newcomer at the time.
It was after these two times that I started to think about this problem. Of course, due to insufficient knowledge at the time, it was definitely not possible to be as thorough as it is now, but it was basically possible to touch the edges, and then set rules for myself. The latter is because I have a small business and don't have so much time to watch and watch the market, so I gradually switched to the swing band in the previous days.
As for the high or low transaction frequency, which is better, I will not discuss it here. Although I am a low-frequency trader myself and know that high-frequency is very controversial, as far as the method is concerned, this is indeed a method, just to see if it can be controlled. Just like lock-ups, most people sneer at lock-ups, but I have seen masters lose tens of thousands through lock-up operations and finally make tens of thousands of profits, and it is not just a one-time good luck, because later There have been many such operations of turning losses into profits. Say it's useless? Obviously not; does it work? But many do fail. So it's still a matter of control.
Therefore, you can find a trading frequency that suits you based on the variety library just mentioned, the nature of the transaction, and the style of the transaction. But you need to know that the trading method you choose, if it can produce profits for you, it will inevitably bear the negative costs, and you need to determine whether you can accept this cost.
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Last updated: 09/06/2023 18:53
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