A lot of traders fail at this game because they are undercapitalized.. It has nothing to do with the strategy. It has nothing to do with trend following, short term trading, swing trading, scalping, mean reversion, whatever. At the end of the day any kind of trading has drag via commission, so you have to work backwards.
Let’s assume that your trend following strategy makes fifty transactions a year. So that’s fifty buys, fifty sells, that’s a hundred transactions a year. Let’s assume you pay ten dollars per transaction. That’s a thousand dollars in commission for the year. If you’ve got a ten thousand dollar account, you’re going to have to making 10% just to break even –and 10% is too much drag. If your account is smaller, let’s say its five thousand dollars, you’re going to have to be making 20% just to breakeven. I’m not talking about strategy, I’m just talking about the mathematics of the transactional drag. I don’t care how good your strategy is, if you’ve got to make 20% to breakeven, you’re pushing it up hill.