Due to greed, fearing to miss any opportunity, wanting to accumulate small gains into larger ones.
The market is limited, and by frequently entering and exiting, you can only capture small market movements, which cannot cover the various costs of your frequent trading. Over time, it will inevitably lead to losses, making it meaningless.
The fundamental reason for frequent trading lies in the lack of clear trading rules. Many beginners like to trade frequently in the short term because human nature drives this; short-term trading yields quick results, and people tend to pursue short-term profits, fearing they might miss every trading opportunity. When they incur losses, they want to recover, leading to more losses.
People's emotions are easily influenced by the market and others. Without trading rules, they can easily engage in emotional trading, causing operations to become chaotic, which leads to frequent trading.
Human greed is also one of the reasons for frequent trading. The market is full of opportunities, and in a greedy mindset, it is difficult to distinguish whether it is an opportunity that belongs to us. Most people fear missing out on opportunities, so they would rather lose nine times than miss that one profitable chance. In the face of high profits, people forget about risk and choose to trade frequently.
If you want to avoid frequent trading, you need to establish clear entry rules, exit rules, and money management rules as soon as possible, forming a trading system that belongs to you, and then trade mechanically according to the system.
Whether it's stocks, futures, or foreign exchange, capital usually flows from active traders to those who are patient. Losing traders like to trade frequently during the day, while skilled traders prefer daily trades.
Frequent trading makes it difficult to achieve profitability; the trading costs are too high—transaction fees and slippage costs degrade the stability of your strategy.
Frequent day trading is hard to profit from in the long run because the day market is limited, transaction fees keep increasing, and there are various factors like slippage in real trading. The final result is that the money you earn in these small-scale day trades cannot cover your losses and trading costs.
Frequent trading will make you frequently enter and exit in the chaotic intraday market every day. You may gain more or less income, but each trade is a small profit, making it difficult to achieve stable profits in the long run.
To achieve stable profits, you need to cut losses and let profits run.
Since letting profits run means you cannot trade frequently. When there is a floating profit, do not leave; do not cash out at the first sign of profit. Hold on to the profits and bear some profit drawdown to let it run. When there is a loss, do not stubbornly hold on; instead, quickly stop-loss and exit. This is the correct trading approach.