Some of the following can be of help.
- Number of Trades
- Total Trading Volume
- Vig to Trading Capital Ratio
- Number of Instruments Traded
- Duration in the Trade ( minutes held)
- Number of Orders Placed / Cancelled Orders
- Number of Unplanned / Impulsive Trades ( which are based on " Breaking News", Based on Other Traders's Positions, Reacting to Opinions of Other Traders )
- Position Size in a single Trade ( Above Avg Size)
- Number of positions at a particular point of time ( More than two ?)
- Tight stoplosses ignoring the Logical stops ?
As I struggle to cut down overtrading , I understand the Broker's ( Market Infrastructure's) way of turning thr trader's networth into his own through VIG, SPREAD, SLIPPAGE.
1 comment:
Dear Prof.
Overtrading is the greatest issue for a trader with internet dealing access (home broker). Really nothing prevents the trader to enter another trade, to his own misfortune.
Some time ago (it seems in fact another incarnation!) I can say I was the master of overtrading. Really! My brokerage statement showed up to 25 + "trades" for the day. The results were quite poor.
As I developed as a trader, I learnt some key aspects of market behaviour, wich allowed me to enter trading in very good trading opportunities.
My overtrading stopped completely when, after doing this a thousand times, I asked myself: "wow, I just bought the downtick in the first trade... what were the other 19 for?" "Couldn't I just be quiet with that first entry and enjoy the move?????????"
The breakthrough came remembering Larry Williams approach to day trading: find a spot, enter and hold till the close.
In my case, hold till the close doesn't work very well, but I manage to discover key levels where to scale out the position - now doing just one or at tops two trades per day!
The real point of overtrading, I realized, is that intraday charts has much NOISE - and this NOISE gets you out of the trade if you are:
a. Following price action tick by tick
b. Using moving averages
The fix I use was to identify entry and target points, so, once the trade is begun, I minimize (yes, shut down!) the trading screen and put alarms to the price levels (stop and targets) - and then go play chess with my work colleagues, so that we are not shaken out of our position by market noise.
Once the alarm rings, (I just love Nelogica!), we see whether we were stopped or profitable.
With this simple solution our ration fell to one, two trades a day, and our sharpe ratio is in the vicinity of 5.
Regards from Brazil,
Newton Paulo Linchen.
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