～Trade frequency and the stability of the EA relationship～

Occasionally, you may come across something called a “high-frequency trading EA.”
From a trader’s perspective, a high frequency of trades can feel appealing.

Trading more frequently often carries the allure of being able to move the market and earn profits quickly.
From the trader’s standpoint,
there is a kind of “sweet temptation” hidden in this lure.
“Maybe it will make profits all at once?”
In a sense, it may be tempting, but...

However, in reality,
“high frequency trading” = “a tendency toward drawdown (DD)”
is a facet that cannot be ignored.

Indeed, in the short term,
there may be periods where performance trends upward.
（In particular, because the trade frequency is high, during these upward phases it may look as though
assets are growing rapidly)

But in the long run, performance tends to decline steadily.
In reality, this pattern seems quite common.
(→ Looking at past “high-frequency EAs” that have been sold,

unfortunately, most of them appear to follow this pattern)

Regarding trade frequency,
considering a single-position scalper EA,
an annual trading volume of about 300 trades (roughly 25 trades per month, about 1 position per day)
seems to be the upper limit to maintain performance, in our view.

If the trade frequency is increased beyond that,
the performance tends to become more volatile (i.e., drawdown is more likely).

With EAs, you don’t run just one EA, but typically operate several in parallel (portfolio management),
so,
instead of forcing a single EA to execute a large number of trades,
it is better for each of multiple EAs to carry out carefully selected trades that they are confident about,
which, in the long term, is advantageous. That is how we see it.

Neko Hakase