Why multiple trades per day makes you a loser

Hello,

first off, I'm from a Forex background. I know the average volatility of the main currencies very well and common spreads.
I often wonder how people tell me that they're doing several trades per day. Guys, please tell me how this is possible? The more trades you make per day, the smaller the timeframe you trade is. I think this makes sense. The problem with small timeframes is that the average profit and average loss decrease a lot. Compared to spread you often get a - how I call it - spread ratio worse than 5:1.

Example:
average pips traded before you get exit the trade on >15min chart = 10 pip (can be either a profit or a loss)
spread = 2

10 / 2= 5. So to speak, for 10 pips you make or loose, you always have to pay 2 pips.

What does this mean? This means, that you have to win 60% of the time to trade breakeven. With so many people having access to the markets and information, nobody can deny a certain efficiency in the markets. This decreases your edge a lot and everyone who's traded for a longer time knows, that a 60% edge is extremely hard to maintain. Now think that the spread ratio can get even worse when the average profit/loss is smaller.

BUT, to make a lot of trades (3+) you'll have to trade those small timeframes. So if you ever wondered why you're doing hard in trading, then think about this aspect. Spread is probably the HUGEST factor that separates the winners from the loosers.

Open to some input and ideas!

Cheers

depends. I know someone who makes trades every day and never loses a trade (not joking, seriously).

if your system manages to win more than 50% of your trades, who cares how many pips you lose to your broker? Only that your broker will be happier =)

Simple. It is only possible when you have a proven scalping system/strategy.
Unfortunately, you haven't seen a black swan. That's too bad for you

Spread doesn't matter when you know what you're doing. If you're shooting in the dark, then you lose on the spread.

Well, you are basing your premise on one set of very limiting assumptions (that you have created, by the way).

You have limited the win expectancy to 60%. That depends entirely on the system or method being traded, doesn’t it? It may very well be 65% or even 70%. It could be as low as 40%. It is irrelevant unless an average reward:risk ratio is established. You seem to have settled on 1:1 as the only possibility.

Then, you have limited wins to 10 pips – 2 pips spread. Why not 15? What is wrong with 20?

You also seem to assume trading only one pair is possible. Trading multiple pairs could multiply the number of trades. Instead of three trades per day it could very easily be three trades per day on each of four pairs, making it 12 trades per day.

The permutations are endless.

Perhaps you advocate trading the daily chart and trading only one pair, where you find yourself waiting for weeks at a time for a proper set up, suffering an anemic 60% win rate and an average win of 20 pips per trade? A talented scalper can do that before breakfast. Again, just slightly altering the initial assumptions changes the initial outcome a great deal.

I will agree with you in saying that the smaller the average pip target the more impact that the spread will have. It doesn’t mean, however, that smaller timeframes cannot be traded quite successfully.

i think multiple trade and pair is not da main issue or spread.most important what you see ?what you feel? if you see and feel there is oportunity or obvious set up then go for it or awya from it(imho)

you are right.
and what's more,to go over the disadvantages of long term trade,we can trade different spot at the same time.

you're the loser here. multiple trades per day can make you have an enourmous amont of return. if you look at the expectancy formula you will notice that the bigger number of transactions you have the bigger the return. the problem with the spread is that you have to have a strategy that pays the spread. you have to look a the link between volatility and spread. if the volatility is 20-30 pips and if the spread is 2 pips than that is a good trade. the spread has to be included in the system backtest.

If you put your money on the table and left it there for one Week...
I, on the other hand, placed my money on the table and took it off the table after 1hr for a profit.

Tell me,...
In what Universe are you able to get your money back, off me,
when I am not even in the market? (don't have an open position)
Now that's a Crucial Point

First of all, folks who trade 1 min charts don't pay 2-pip spreads for eurusd, but 1 pip or less. You can even trade 10 sec charts and take hundreds of trades a week. If you're able to trade the "noise," then it's not really noise, is it?

wha??

He's not a trader for GS is he?

Good on him... Does he keep a blog? Show the way ----->