Bigger turnover does not mean bigger profits

[nigelk]

Sub Title: Are we sending out the wrong message to newbie traders?

You can read on literally hundreds of blogs and websites that bigger turnover means bigger profits.

For the sake of newbie traders, I’m going against the grain and saying no it doesn’t.......

We have two traders, “Hare” and “Tortoise”, they both have the same amount in their bank, and use the same amount per trade. For every one trade Tortoise makes, Hare makes four. Hare, having a bigger turnover, should make a bigger profit than Tortoise.

The day of the race:
Hares off! Makes his first trade, gains a tick. Second trade another tick. Third trade, re-enters straight away and gains another tick! Three ticks in profit! .........straight back in...Fourth trade goes against him and he loses a tick.

Here comes Tortoise and his one trade. Enters the market... and gets two ticks profit.

Result: A tie, both make a two tick profit.
Hold on a mo’ but if tortoise only used a quarter of Hares turnover and got the same result, doesn’t that make him a better trader?................

So to all new traders out there, it’s a marathon, not a sprint, and if slow and sure suits you, then there’s nothing wrong with that.

[gutuami]

I would say:
1. Bigger turnover does not always mean bigger profits.
2. Lower turnover does not alway mean lower profits
3. Lower turnover does not mean bigger profits.

[PeterLe]

It's all subjective.
Tortoise may have lost two ticks in his first trade too.
If you know what your ROI is (and without looking at the posts, I think it is average 0.17%) then it follows that the more money you put through the more money you will make (sure you will scratch many).
So my thoughts are that it not necessarily how many trades you make, it how much you push through the market that matters.
The problem is, the bigger your stakes become the harded it is to get matched (unless of course you offer money to the market, ie you help form the market, rather than accept what's available)
Regards
Peter

[nigelk]

Hi Guys,

The post was meant for the benefit of new traders.

Don't rush, take your time, try to spot good entry and exit points, rather than just entering trades to get a bigger turnover.

I'm sure you'll agree that if they push money through the markets without knowing what they are doing, just because they keep reading that higher turnover=bigger profits, it'll end up: higher turnover=bigger losses.

[SilentDave]

I think it is fair to say that over trading can be a problem for new (and some not so new) traders.
I am often guilty of trying to force things particularly when things aren't going my way rather than waiting for an opportunity.
I think the key is to only place a trade when there is a clear opportunity rather than feeling the compulsion to constantly be pushing trades through the market.
Having said that as Peter says earlier in the thread, if the opportunities are there then the more you can cycle through the market then the bigger your profits will be.