Why We Over Trade

StatsEdgeTrading

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This week, I took 12 swing trades from the StatsEdgeSwing systems. One question I get from time to time concerns whether we are “over-trading”? My answer is yes, and I am glad we are. Let's go over it.

I asked GPT to define overtrading for us:

Overtrading refers to the excessive buying and selling of financial instruments, such as stocks, options, or currencies, in a short period. This behavior is often driven by emotions like excitement, fear, or the urge to constantly “be in the market,” rather than following a sound trading strategy.

I think the key to look at there is the part about how overtrading is often driven by emotion. Ours is very intentional.

If you have an edge, you should be exploiting it as much as possible. This allows some diversification benefits but couples them with the power of compounding over time.

So how do we know how often to trade? Thankfully, that answer is pretty simple for us systems traders. Below is a table of our swing systems with some vital stats on how many positions we should be holding at any time. (Higher Sharpe and profit factor, the better).

You can see that we get the best benefit from between 5 and 10 holdings at a time, and since we run three swing systems, that translates to between 15 and 30 trades a week.

Data like this becomes really liberating since there is no longer a thing as overtrading at all. Take as many trades as you can according to your plan and let the systems edge work over time.

If you don’t have this data about your trading, you're flying blind. Come on over to https://www.statsedgetrading.com/. No trading is perfect and without drawdowns, but knowing the number behind what you do keeps you in the game when the trading is hard.