How to Modulate Your Trade Frequency By Justin Paolini

“If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.” – Bill Lipschutz, Market Wizard

We are going into August and hence into the Summer Doldrums as they’re called. As traders we should be following the market’s rhythm , becoming more aggressive at times, (i.e. “expecting to have trades”) and more conservative at times (i.e. “expecting to NOT have trades”).

Here are my rules of thumb for modulating my trade frequency and my mindset, so that I am never risking my hard earned money unless there is good reason!

Capital Preservation is Key

Get Rich Slowly– Kevan Conlon

  • Most traders focus on the money they can potentially make…
  • Most traders’ motto is “a profit is a profit”…
  • Most traders focus on getting good entries…

and most traders lose money or blow their accounts.

  • The best traders focus on capital preservation and how much they are risking (which is the only thing they can control)…
  • The best traders’ motto is “run your profits, cut your losses”…
  • The best traders focus on trade management.

Most aspiring traders come into our System Development Workshop expecting to find a way to trade 5 times a day and make money every day, every week, every month. Inevitably, I must tell them the cold hard truth: intraday opportunities are simply not that abundant. The focus should be on selecting quality trades and only trading when the markets are actually moving well (for your model).

Basically, most struggling traders overtrade. They look for trades. They try to force trades when there’s nothing happening. Then, when they try to be more conservative, and see some trades slip through the net, they get all frustrated and start the vicious cycle again.

I have no trouble letting trades slip through the net, because I know that when there are high quality trades, I will usually catch them.

Rules of Thumb

Here are the variables and rules of thumb I keep in mind when confronting the markets. They help me get into the right mindset and ensure I only risk my capital when conditions are ripe.

  1. Time of Day (I want to initiate my trades when there is more participation, which means generally 6.30 AM London time to 14.30 London time);
  2. Time of Year (I am cautious during mid-July to end of August, as well as after US Thanksgiving);
  3. Bank Holidays (I probably won’t trade when either London or NY are on holiday);
  4. Volatility: i have learned to trade then volatility is increasing or high. There are various ways to measure volatility which we spoke about here.
  5. Drivers/Sentiment: when you have a clear driver (like UK’s Boris Johnson & Brexit now) then trading conditions are easier. It also gives you more confidence. We wrote on how to follow sentiment here.

Over to You

This post was basically self-explanatory but to finish it off, I would suggest re-reading How to Ruin a Good Trading Model. Overtrading, or entering the markets when conditions really aren’t as favourable as they should be, can be a dangerous practice.

So going into August it is much better to study your results from 2019, see what has been working and do more of that. Don’t get involved in the markets unless they are really calling you into action. There will always be another trade.

Good Luck!

About the Author

Justin is a Forex trader and Coach. He is co-owner of, a provider of Forex signals and Education from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

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