The Myth About Small Forex Sample Sizes

Winsor Hoang  |

To be a successful Forex trader you must have a trading edge. To develop an edge, one must be patience and determined but they must also think in terms of possibilities. There are many books and traders that suggest a sample size of about 20 trades. However, this sample size suggestion is too small. To understand why, and to learn why automated trading can help you achieve more frequent trades continue reading.

A trader’s goal is to increase profitability and decrease risk, and there are a lot of factors that go into achieving this goal. One of them being, trading frequency. Put simply, trading frequency represents your opportunity for profit. It does not mean you trade mindlessly every chance you get. It applies to finding opportunities to increase profits. The more opportunities and possibilities a trader can find the more chances they have of creating profits. Sounds basic right? Well, not for manual traders.

Subscribe to get our Daily Fix delivered to you inbox 5 days a week

Manual traders are at a disadvantage when it comes to trading frequency. The suggested sample size is around 20 to 100 because that is what most manual traders can calculate. Manual trading is extremely time consuming and it requires very high levels of discipline. Even if a trader does not have a day job, they do have a life and that means missing out on trades. Not to mention few traders have the necessary level of focus required to make consistent profits. Automated trading solves a lot of trading problems.

Automated trading systems can calculate the net profit of 1000 trades or more. The advantage of this is having a larger sample size to analyze your test results. This is extremely important if you are going to be consistently profitable and create a trading edge. If someone was to flip a coin 10 times, their odds of obtaining 50 percent heads and 50 percent tails is not as great as if there were flip the coin 1000 times. Most people do not have the patience or time to flip a coin 1000 times just to improve their results. Just as how manual traders are at the same disadvantage. But the same logic applies to trading in that a large sample size of real trades increases the possibility for reaching better results and higher profits. A trader cannot expect to meet profits having two or three trades in a month. This means their trades are infrequent and their sample size is too small to accurately analyze their results.

The bigger your sample size the easier it is to read the results and look for opportunities to profit. The more opportunities a trader has for profit, the greater possibility for profiting over a period of time. A manual trader will be limited in the sample size and this limits their opportunity for profits. Automated trading not only allows a trader to increase their sample size, but automated Forex trading systems trade faster. In a field where every second counts, automated trading gives a trader an advantage of timely trades.

Despite what a trader will read in books, a sample size of 20 to 100 trades is not effective in producing profits and creating an edge. A Forex trader needs a larger sample size to work with, and an automated system that calculate 1000 or more trades can help produce better results and more consistent profits.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Last Price Change % Change