More trades or better trades: the frequency trade-off
Posted: Sat Oct 31, 2026 7:09 pm
A scalper can increase profit by trading more often with a small edge or by trading less often with a larger edge. Costs, capacity, and attention shape the choice.
A strategy with a 0.2 pip edge per trade and 200 trades a day yields 40 pips. A strategy with a 1 pip edge and 30 trades yields 30. The first needs excellent execution and low costs, since a small increase in friction wipes out the edge. The second has more margin of safety.
High-frequency approaches amplify the effect of execution quality. Each additional trade pays costs and adds noise to the results.
The relationship between the frequency and edge is usually inverse: loosening filters increases trade count but lowers average quality. The optimal point is where marginal trades barely break even after costs.
Plot cumulative net profit against the threshold of the signal strength. The curve typically rises, flattens, and then falls as weaker trades are included. The peak guides the filter.
Also consider the human cost: more trades demand more attention and cause more fatigue.
Where does the marginal trade stop adding profit in the strategy's data?
A strategy with a 0.2 pip edge per trade and 200 trades a day yields 40 pips. A strategy with a 1 pip edge and 30 trades yields 30. The first needs excellent execution and low costs, since a small increase in friction wipes out the edge. The second has more margin of safety.
High-frequency approaches amplify the effect of execution quality. Each additional trade pays costs and adds noise to the results.
The relationship between the frequency and edge is usually inverse: loosening filters increases trade count but lowers average quality. The optimal point is where marginal trades barely break even after costs.
Plot cumulative net profit against the threshold of the signal strength. The curve typically rises, flattens, and then falls as weaker trades are included. The peak guides the filter.
Also consider the human cost: more trades demand more attention and cause more fatigue.
Where does the marginal trade stop adding profit in the strategy's data?