$2,000 to $200,000 in 2020 at 2.00% per day.

[sstheo]

You beat me to exactly what I was going to say!

I have been saying all along that the whole purpose of this experiment was to let the account size dictate the number of contracts traded and this is how he was going to grow 2% every day. He has so far traded positively every day of this crazy volatility, but since it was only with 1 contract, he his failing at what he set out to do.

With his account at almost 4k, he should be trading 4 or 6 contracts, but I'm not exactly sure of this rule. The volatility does require increasing stops and targets, and therefore lowering contract size I think (ie. instead of trading 4 contracts with a stop of 5 points, you trade 2 contracts with a stop of 10 points), but there was no reason to drop all the way to one, other than psychological.

If he was trading more contracts, his PnL clearly would have been double, or more. In a way, this shows that the psychological element is already affecting him, and this is exactly the kind of trouble most people run into. In this high volatility environment, I understand why he is scared, but since he still finished with a profit trading 1 contract, he would have finished with twice as much, or 4 times as much, if he was trading 2 or 4.

I of course don't blame him one bit, but I'm not sure how he will get out of this psychological barrier that he has now hit. All along I didn't like how he was already "self" adjusting his number of contracts traded, as if he has the power to forecast which trades would work and which wouldn't. It would of course be a wonderful skill to know that on a losing trade you only trade one, but on a winning trade you trade 6, but this isn't how it works.

Given the last chart he posted though, showing how 3 of the trades went heavily against him before recovering, I understand why trading multiple contracts would have been psychologically damaging, but this unfortunately shows that scaling up like this is very difficult, and his trades are hiding some ugly factors in that some of them go against him heavily, and when trading very large size, it will be difficult to hold. Its easier to hold these trades with one contract, but if he is taking on too much risk for even trades that end up being winners, then the goal of scaling up is dead in the water.

The idea of scaling up is far from dead. And I am eager to resume. If the volatility doesn't slow down, then I may just assume this is the new normal and increase the contract size anyway. But I still argue that as long as I am above the 2% line, then this experiment is working out just fine. The scaling is the means to the end, which is $200k via a gradual yet very aggressive 2% average DAILY growth rate. (The average hedge fund can't do 2% in a month.)

 

[tiddlywinks]

So on one side you are saying the enhanced volatility doesn't affect your 2% target (which is unsustainable due to the law of large numbers, if nothing else), and an argument can therefore be made that it (enhanced vola) is not offering you increased profits either. On the other side you are saying the enhanced volatility prevents you from stretching.

No one said you should jump from 1 micro to 8 micros. By your own rules, your balance comfortably supports more than 1 micro. 2 is more than 1 and is how it should start! And that was true BEFORE the enhanced volatility too. You are merely using the volatility as shade for not benefiting financially, psychologically, or growing as a trader.

 

[sstheo]

So on one side you are saying the enhanced volatility doesn't affect your 2% target (which is unsustainable due to the law of large numbers, if nothing else), and an argument can therefore be made that it (enhanced vola) is not offering you increased profits either. On the other side you are saying the enhanced volatility prevents you from stretching.

No one said you should jump from 1 micro to 8 micros. By your own rules, your balance comfortably supports more than 1 micro. 2 is more than 1 and is how it should start! And that was true BEFORE the enhanced volatility too. You are merely using the volatility as shade for not benefiting financially, psychologically, or growing as a trader.

I think I see what you are saying. I do see that the increase in volatility has a potentially huge positive upside. And with my 80% win rate and well-placed stops then, in a way, I am missing out by not taking advantage of this increase in volatility. It could be argued that if the volatility is 10x greater than before that I should be making 5x to 10x as much each day - as long as I continue to follow my rules.

 

[tiddlywinks]

Now re-read my previous post about TICK VALUE per open position.

At this point in time, will your discipline break at $1 PER TICK?

Note: we are not talking about volatility.

 

[Seaweed]

I think I see what you are saying. I do see that the increase in volatility has a potentially huge positive upside. And with my 80% win rate and well-placed stops then, in a way, I am missing out by not taking advantage of this increase in volatility. It could be argued that if the volatility is 10x greater than before that I should be making 5x to 10x as much each day - as long as I continue to follow my rules.

I feel this exact same way. But at the same time, I think we have to consider this last chart that you posted. I don't want to impart my way of trading onto you, but its obvious that the shorts went against you heavily. And on top of this, the shorts also all broke the previous swing high, which can be deadly.

That last short at C is good mind you, and you probably entered after it poked the previous high and was coming down, and its just that it went higher, but the shorts at A and B are more troubling.

It worked out for you this time, but if the stats for many of your trades are like this, when your profit isn't as large as your risk, then its only a matter of time until you have some big losses.

You seem to have an 80% or better win rate, but if the win rate comes from large drawdowns like this, it might be trouble, and then I understand why you aren't willing to take on the additional risk of more contracts you would be heavily in the red before it turns around.

 

[tiddlywinks]

It worked out for you this time, but if the stats for many of your trades are like this,

Then it can be determined if profitability is predicated on solid, scalable setups and acceptable management, or if profitability is based on nominal values and general feelings about money.

Everything is related.

 

[canoe]

you guys are batshit insane to be criticizing OP for not increasing contract size enough when he's already attaining his goal of around 2%/day. he's already leveraged 4x employing 1 micro contract with $4000. that is more than enough leverage to employ under these volatility levels.

these past 2 weeks, there have been countless moments when i was making $1,000 (50 NQ points) with just 1 emini contract in mere seconds. that's how crazy the volatility has been. with 2-3 micros, being down $100-150 instantly isn't even an issue with this volatility. a couple successive losing trades like this can put you down $400 in the blink of an eye and boom, 10% drawdown instantly.

perhaps you're just criticizing the OP for not following his original plan of scaling up a contract per every $500 but that part of the plan was extremely reckless and naive anyway. the OP probably had no appreciation for volatility and leverage at the time he posted that statement b/c that scaling up plan is basically employing ~36x leverage at a per-contract-basis in which case it'd have only been a matter of time before he was wiped out.

i'm happy to see that the OP has wised up and is employing responsible leverage.

 

[sstheo]

I feel this exact same way. But at the same time, I think we have to consider this last chart that you posted. I don't want to impart my way of trading onto you, but its obvious that the shorts went against you heavily. And on top of this, the shorts also all broke the previous swing high, which can be deadly.

View attachment 221420

That last short at C is good mind you, and you probably entered after it poked the previous high and was coming down, and its just that it went higher, but the shorts at A and B are more troubling.

It worked out for you this time, but if the stats for many of your trades are like this, when your profit isn't as large as your risk, then its only a matter of time until you have some big losses.

You seem to have an 80% or better win rate, but if the win rate comes from large drawdowns like this, it might be trouble, and then I understand why you aren't willing to take on the additional risk of more contracts you would be heavily in the red before it turns around.

I didn't feel like those shorts went heavily against me. My stop was at 40 ticks (-$20 per micro contract), and it was not breached on any of those trades. And I believe the market structure was a stall after a huge run up, so I expected some profit taking to come in near trade A and trade B, and some initiative selling at C. And that is exactly what we got.

Now the test will be when I have more than one contract on....

 

[sstheo]

you guys are batshit insane to be criticizing OP for not increasing contract size enough when he's already attaining his goal of around 2%/day. he's already leveraged 4x employing 1 micro contract with $4000. that is more than enough leverage to employ under these volatility levels.

these past 2 weeks, there have been countless moments when i was making $1,000 (50 NQ points) with just 1 emini contract in mere seconds. that's how crazy the volatility has been. with 2-3 micros, being down $100-150 instantly isn't even an issue with this volatility. a couple successive losing trades like this can put you down $400 in the blink of an eye and boom, 10% drawdown instantly.

perhaps you're just criticizing the OP for not following his original plan of scaling up a contract per every $500 but that part of the plan was extremely reckless and naive anyway. the OP probably had no appreciation for volatility and leverage at the time he posted that statement b/c that scaling up plan is basically employing ~36x leverage at a per-contract-basis in which case it'd have only been a matter of time before he was wiped out.

i'm happy to see that the OP has wised up and is employing responsible leverage.

. . . Proof that there are lots of different ways to look at the market and trading. Thanks. What do you think is sufficient margin for one micro in this current market and in last year's relatively much less-volatile market?

 

[canoe]

. . . Proof that there are lots of different ways to look at the market and trading. Thanks. What do you think is sufficient margin for one micro in this current market and in last year's relatively much less-volatile market?

that's a somewhat personal question b/c leverage is also dictated by the type of strategy one employs. but for the type of scalping style you employ, my general rule of thumb would be:

a) no more than 5x during heightened volatility like these past couple weeks
b) no more than 10x during average and low volatility

the reason why i don't like to go higher than 10x volatility even during lower-than-average volatility is at that point, you find yourself overexposing yourself trying to force-squeeze profits out of the market and a sudden unpredictable change in markets can vaporize months of profits in an instant.

anyway, to answer your question, assuming we're talking about MNQ,

i'd say around $3600 per 1 MNQ contract in current volatility and $1800 during average to low volatility. obviously this shifts slightly as the contract's notional amount changes but you can easily do the math yourself.

you can make money really, and i mean really, quickly even with just 5-10x leverage. i traded just 1 MNQ contract on a $5200 AMP account this past Tues, Wed, Thurs, and Friday and my profits were, $360, $96, $350, $202 respectively.

that's a 19.38% return in 4 days of trading employing just 3.46x leverage. seriously, just a small amount of leverage is all it takes to make major bank in this volatility. those guys up there complaining about not going for 3 contracts on a mere $4000 account in this environment seriously have no concept of risk management.