majority of traders have higher odds of profitability the less they trade. The more
you trade, the more commission costs and bid/ask spreads you have working
against you.
Do you trade enough markets for buy signal opportunities?
If
you are trading trends, then you need to be trading enough markets to give
yourself the potential of capturing those trends. Systematic trend following
systems only work because they are trading diversified
futures across all
markets: metal, agricultural commodities, energy, bonds, equities,
interest rates,
currencies,
etc. They limit their risk through diversification with small positions
for each signal entry, and profit by capturing the trend
in whatever market that
has one.
Trend following doesn’t work as well if at all when trading only one or few
markets. The same thing is true for momentum stock strategies;
you need a list
of at least 10 to 15 stocks if you are looking to buy the ones that breakout and
trend. You need to own the right one, but you have to watch enough so you don’t
miss that right one. For systematic
trading to be successful, you need
diversification of opportunities to get the buy signals you are looking for.
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