Counting the Cost of Heavy Trading Days

[Fairman]

Counting the Cost of Heavy Trading Days

Over 20 trading days, a trader notes the number of trades each day. Five days had six or more trades, averaging 7 per day, with an average result of minus 0.15R per trade. Fifteen days had three or fewer, averaging 2.5 trades per day, with an average of plus 0.25R per trade.

Compute. Heavy days: 5 days times 7 is 35 trades, 35 times minus 0.15 is minus 5.25R. Light days: 15 days times 2.5 is 37.5 trades, 37.5 times 0.25 is plus 9.375R. Total: about plus 4.1R across 72.5 trades.

If heavy days had been capped at three trades, and assuming the first three trades on those days performed like light-day trades at plus 0.25R: 5 days times 3 trades times 0.25 is plus 3.75R. The total would be 9.375 plus 3.75, which is 13.1R. A gain of about 9R, more than three times the actual result.

Where does the difference arise? Extra trades on heavy days are marginal setups taken out of eagerness, boredom, or a desire to recover.

Also add costs. Heavy days had 20 extra trades, at an average cost of 0.08R each, for 1.6R in spreads.

What rule would capture this? A maximum of three trades per day, with a stop for the day after two consecutive losses.

Check the assumption that early trades are better. It is plausible, and testable by sorting trades by order within the day.

Exercise: compute your average R by trade number within each day.