I am trading on daily timeframe chart. How to decide how many trades should be opened ?
Shall I …
do divide funds into multiple trades and open all of them simultaneously. (this gives trouble in managing trades and writing journal) …risk is spread though.
do 1 trade per week and invest all funds into this trade…more risk here.
I am unable to decide what should be the suitable frequency of trades … I want to improve this part. Please guide.
I’d say the first thing you need to do is develop a trading plan which clearly states under what conditions you will enter the market.
Trading is all about having a system which allows you to time entries and exits in the markets profitably. It’s tough to say “I will only have 1 trade per week”. Rather, you should be saying “I will only trade valid signals according to my trading plan”.
If it’s 1 trade per week or 20 is irrelevant. The relevant part is that you remain consistent, and ALWAYS take a trade based on a signal you get. Every single time, always. Can’t stress that enough.
If a currency pair signals a trade to you, according to your trading plan, you need to be taking that trade 10 out of 10 times.
Jake
I agree with Forexunlimited. I don’t think the answers to your question will help you very much, as those answers will tend to be based on the particular traders goals and some will say 1 some will say as many as they can. However I think the reasoning behind the answers you get will give you the help you’re looking for.
For example I have a very strict set of trading rules that I follow. My plan is designed to deliver what I want it to deliver. I trade once a day. I do that because in addition to fundamentals, sentiment and tech anlaysis that I will use for tomorrows trade, I consider the reasoning and results of todays trade in my decision for tomorrow.
Another trader who only trades when all market conditions are met, may trade once or more. Most traders whether they trade 1 or 100 times at once will only risk a certain % of their account. So if it was 5% total and the trader saw 5 trades they want to open the would divide the 5% by 5 and a lot 1% per trade.
But as Forexunlimited has already said what and hou much you trade should be written in detail in your trading plan and followed.
Gp
If you split a big position into multiple ones and open all of them at the same time, what do you achieve ?
If you open a big one and leave it there to go in minus for 1 week again is not good.
What if you open a small position, and if it is in profit you add to it, or otherwise you open in the opposite direction ? In the end, you should try all possible combinations until you find something repetitive that brings you money, right ?
It really depends on a lot of factors, like your risk preferences or your lifestyle considerations. If you are able to spend enough time monitoring your open positions and can be able to make quick trade adjustments when necessary, then you can opt for having multiple trades at a time. If you are more comfortable with keeping track of just one longer-term position, then you can stick with a swing trade with a larger risk on a single trade. Just make sure that you come up with risk management rules first and follow them to ensure that you can be able to stay afloat and recover even in the worst case scenario. Hope this helps!
>>>If it’s 1 trade per week or 20 is irrelevant.
Yes. I get many signals as per my plan.
>> If you are more comfortable with keeping track of just one longer-term position, then you can stick with a swing trade with a larger risk on a single trade.
I do this … but problem to this is …sometimes this takes long time either to hit target or hit stop loss …fund is not used properly.
Its been said by others but I think its good advice. If you can’t sleep at night you have to many trades on. If you like your sleep reduce your trades. Or there is always the lower TF’s to trade. Otherwise ForexUnlimited is right on the mark, if your signal says trade then trade you must.
I thing primarily you should get some more trading education(about risk management) and than think about what you want to do, and how many positions you want to open.
Personally I’d start a little more broad brush - decide on my preferred maximum overall exposure to the market at any one moment, equate that to a percentage of my trading account, then look at my maximum preferred exposure to one trade at a time. For instance, for me, I won’t have more than 1% of my account exposed on the table per trade, and will not have more than four open trades with exposed Stops at a given moment. So my maximum loss at any time is 4%, and I am rarely exposed to that. Once I trail a Stop past BE then that trade represents no risk, so I’d happily add a further trade.
A lot of my trading takes place off the Daily chart, and it is rare that I see more than four opportunities at a time that I would want to take, so in effect this doesn’t limit my trading anyway, but it does give me a safety net. If I have a terrible day/moment, my loss is capped at 4%.
If I am Intraday trading then I apply the same principle, I just hold the trades for a far shorter period of time. But if I am seeing moves I like, say, on all the Majors, I might be sitting at my terminal for a few hours entering off the five minute chart, but I still won’t have more than four individual trades open at a time with an untrailed Stop.
But for me just deciding that I am happy to risk 4% at a time so lumping that on one trade is not a sufficiently elegant or nuanced solution to be sustainable over the long haul. I would far rather decide on my preferred risk per trade, and on my maximum overall account exposure, then take what opportunities the market should offer beneath that ceiling. Some weeks I might only place a single 1% trade, other weeks I might place several, but never more than four at a time.
But that said, you have had some good responses here, and we all of us must set our own rules, then live by them.
ST
To keep things simple, set a maximum % of your equity you are willing to lose. So for example, the maximum you want to lose is 30%, then only have a max of 15 trades risking 2% per trade.