Is it better to have more trade counts?
Geko here.
There is an item in backtest data called "number of trades."
For those who trade FX, you may have the experience that you often think, “I want to trade a lot,” right?
From another perspective, this has the same meaning as the feeling of wanting to hold a position whenever the opportunity arises.
And this tendency seems to be stronger the more inexperienced you are in FX.
If anything, as you become more skilled in FX, you can wait for trading opportunities and tend to be selective about trades.
This kind of tendency regarding the high frequency of "trades" can also be seen in automated trading systems (EA).
From the perspective of developing EAs, this is something quite obvious to say, but
“The number of trades should be neither too many nor too few, but just the right amount.”
I think this is the case.
I'll explain the reasons below.
First, the number of trades varies depending on the trading style.
High-speed scalping might involve dozens of trades per day, while swing trading might involve only a few trades per month.
Second, if the number of trades is too few, it becomes difficult to determine whether the EA's performance is a fluke.
For example, if there is an EA with 100% win rate over ten years of backtesting, but it only had one trade during the test period, you cannot judge whether it was just luck or destined to win.
If you lose in the next trade, the win rate would become 50% at that point.
Frankly, I wouldn’t want to use an EA that trades only once in ten years.
Third, on the other hand, if the number of trades is too high, the impact of the spread becomes larger.
Spreads can exhibit characteristic differences depending on the FX broker.
Also, some brokers charge trading fees only when using an EA, and others widen the spreads.
This means that an EA that trades ten times a day will be affected by spreads and fees about ten times more than an EA that trades once a day.
In this regard, there are cases where bonuses or cashback are offered based on trading frequency, so it isn’t possible to say it’s always disadvantageous.
For these reasons,
“The number of trades should be neither too many nor too few, but just the right amount.”
is the conclusion.
Of course, there is no best answer for the number of trades.
What matters is ultimately making a profit.
As a rough guideline, there are 365 days and 52 weeks in a year, so
- If trading once a week, that’s 52 trades per year
- If trading twice a week, that’s 104 trades per year
It might be good to use these numbers as a standard when screening EAs.
