The Optimum Potential Number
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102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118
119 120 121 122 123 124 125 126 127
The optimum potential number assumes you would be making
every single trade (buys and sells) based on the magic numbers. In
this example, you are following three real-time securities; therefore,
you have nine potential trading opportunities. Using the magic
numbers, each security gives you three trading opportunities. This
leaves us with the optimum number of trades, which, as you remember,
is nine (3 x 3 = 9). This number should not be exceeded on a
trade-per-day basis.
In reality, you never take every single trade because every
trade isn't a high-probability, high-profitability trade. You can use
the optimum potential number to examine overtrading. If you
exceed the optimum potential number, you are in all probability
gambling. Remember that these numbers reflect the buy and the
sell. To examine the number of individual buys or sells, simply
divide the optimum potential numbers by 2. (See Table 3.2.)
By using a combination of the conservative numbers and the
optimum potential numbers, you will be able to better examine
your trading patterns. Remember to note the time of day you made
the trade. This will become helpful in your analysis to ascertain
whether you are trading when time-cycle volatility is in your favor.
Table 3.2 Optimum potential numbers
Per Day Per Week Per Month Per Year
Day trader 18
Microtrend trader
Position trader
90
18
360
72
18
4,320
846
276
It is also important because later, in Chapter 7, we will address key
biological and psychological issues that affect trading.
The optimum potential number assumes you would be making
every single trade (buys and sells) based on the magic numbers. In
this example, you are following three real-time securities; therefore,
you have nine potential trading opportunities. Using the magic
numbers, each security gives you three trading opportunities. This
leaves us with the optimum number of trades, which, as you remember,
is nine (3 x 3 = 9). This number should not be exceeded on a
trade-per-day basis.
In reality, you never take every single trade because every
trade isn't a high-probability, high-profitability trade. You can use
the optimum potential number to examine overtrading. If you
exceed the optimum potential number, you are in all probability
gambling. Remember that these numbers reflect the buy and the
sell. To examine the number of individual buys or sells, simply
divide the optimum potential numbers by 2. (See Table 3.2.)
By using a combination of the conservative numbers and the
optimum potential numbers, you will be able to better examine
your trading patterns. Remember to note the time of day you made
the trade. This will become helpful in your analysis to ascertain
whether you are trading when time-cycle volatility is in your favor.
Table 3.2 Optimum potential numbers
Per Day Per Week Per Month Per Year
Day trader 18
Microtrend trader
Position trader
90
18
360
72
18
4,320
846
276
It is also important because later, in Chapter 7, we will address key
biological and psychological issues that affect trading.