How Many Stock Trades Should You Make Per Day?
How Many Stock Trades Should You Make Per Day?
How many stock trades should you make per day? That’s the question on every stock trader’s mind when the market opens, and it’s hard to answer without first defining what we mean by trades. A trade could be any of these actions: making or canceling a limit order, making or canceling an automated stop-loss order, closing out an existing position at a profit or loss, or entering into an entirely new position by buying shares of stock that have not previously been owned by your brokerage account.
Decide what you’re trying to achieve
The best way to determine the number of trades you should make per day is to first decide what your goal is. Do you want to create a large portfolio that covers many different investments in order to hedge against losses, or do you want to try and beat the market by trading as often as possible? Once you know your desired outcome, it will be easier for you to calculate how many transactions per day are required for your goal. For instance, if you are only interested in making a couple of trades a day so that your portfolio stays diversified and less risky, then it would not make sense to trade more than two stocks per day.
Consider your risk tolerance
Your risk tolerance will determine the number of stocks you trade per day. If you are more risk averse, you will likely only trade one or two stocks per day. On the other hand, if your risk tolerance is higher, it might be beneficial to trade four or five stocks at a time. Your decision about how many stocks to trade at one time depends largely on your financial situation and your goals for investing.
Know the costs
The amount you trade per day will depend on the size of your account and how much you are willing to lose. A good rule of thumb is to never risk more than 1% of your portfolio per trade. This means that if you want to invest $1000, then each trade should be at most worth $10. In addition, trading costs may vary depending on the brokerage firm but a typical fee is in the range of $5-7 per trade. This can add up quickly so it’s important to know what your fees are before executing any trades.
Set a limit
To some traders, this may seem ridiculous. To others, it may be a good idea. Whatever the case may be for you, setting a limit can help you maintain the discipline to trade within your risk tolerance level and keep emotions in check. The general rule is no more than one trade per day, but we recommend that you experiment with your own trading strategy and determine what works best for you.
Review your trades
I had a few questions on how many trades you should be making per day. The common rule of thumb is to make as many trades as possible with the time and funds you have. For example, if you have $1,000 to trade with each day and only two hours of time in which to do so, your goal would be to make at least 20 trades per day. That might sound like a lot but it’s really not when you think about it. I’ve seen some people claim that 10-15 trades per day is a better number for beginners but there are no hard and fast rules about this number. The best way for new traders to figure out how many stocks they should trade is by trial and error.
