February 2, 2012 | In: General

How Many Trades Can I Make Per Day?

A common question among new investors is “how many trades can I make per day?” or “is there a limit to the number of trades I can make per day?”. The answer to the first question is “you can make unlimited trades per day”, which means that the answer to the second question is “no, there’s no limit whatsoever on the number of trades you can make per day”.

Now, that we know that there is no regulation to limit the number of trades per day to a specific number, let’s try to find out how many trades can be done per day? Well, if you’re using a machine to do the trades for you (buying and selling), then you can do tens of thousands of trades per day (this would be called High Frequency Trading [HFT], where a computer software will automatically buy and sell stocks based on quantitative data – usually the time between buying and selling is a second or even less).

However, if you’re doing the trades yourself (which is the case of 99.99999% of the traders out there), then you trading is limited to the below factors:

  • Your average fill time (sometimes it can take a long time to get your order filled, see what is the average fill time of an order?). This can take about 5 seconds on average.
  • The time you take to make a decision about a stock, including the time to research a stock. Note that if you know the stock well, you can eliminate the time it takes you to research a stock. This step can take up to 15 minutes.
  • The time it takes you to find a good opportunity for buying and selling. This can take up to 10 minutes if you have the right tools that will find you these good opportunities. If you don’t have the tools, then this can take you up to 20 minutes (on average). The time for this step can be reduced to 5 minutes if you know the stock well and you’re trading the same stock over and over again (sell when up, buy when down).
  • The time it takes you to actually do a trade (filling in the necessary information and making sure that all the filled in information is correct). This can take up to 5 minutes.

As you can see, there are many limiting factors to how many trades you can make per day. A trade every 15 minutes or so can be done in case you’re familiar with the stocks that you’re trading and in case these stocks are very volatile (there are many buying and selling opportunities for these stocks every day), which means that in a full trading day (consisting of 6 hours and 30 minutes), you can do about 26 trades/day. However, please note that it’s possible for a few investors to go above this number. I have personally reached about 40 trades on one day last year, which meant I was making a trade every 10 minutes (not all of these trades were profitable though!).

Note that being a high frequency trader does not mean that you’re a day trader. A day trader (by definition) is someone whose stock portfolio is completely emptied by the end of the day.

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on fadi.el-eter.com.

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