Any advice for a soon to be full-time trader?

[Howard]

You left out the most important data


What is your monthly nut to pay all bills ?

$4500 pre-tax if I am to sustain my current standard of living.

That’s 90 ES points net per month/4,5 points per day on one contract. Or approximately 1 ES point per day on 5 contracts.

To clarify – I’m NOT trying to sustain a ‘living’ on a $15 000 account month after month. My focus moving forward is to grow/scale/compound my account and then I’ll re-evaluate when my savings are becoming slim.

Some of the best most simplistic advice I ever received on here many years ago when I first started trading index futures was that had a profound effect on expanding profitability.

Yes, that’s good advice, but leverage is a double edged sword, although I do agree with you. Anyway, part of the reason I chose ES initially is simply because of the huge opportunity of scaling your operations and being able to trade multiple contracts with ease.

 

[volente_00]

$4500 pre-tax if I am to sustain my current standard of living.

That’s 90 ES points net per month/4,5 points per day on one contract. Or approximately 1 ES point per day on 5 contracts.

To clarify – I’m NOT trying to sustain a ‘living’ on a $15 000 account month after month. My focus moving forward is to grow/scale/compound my account and then I’ll re-evaluate when my savings are becoming slim.



Yes, that’s good advice, but leverage is a double edged sword, although I do agree with you. Anyway, part of the reason I chose ES initially is simply because of the huge opportunity of scaling your operations and being able to trade multiple contracts with ease.

It's not a double edge sword if you know your trading methodology has a long term positive expectancy.


It's simple probability and being disciplined


If you are just taking random trades then you need to stay in sim until you develop one that does. Then deploy it in the micros first to verify it correlates to real money trading. Then scale it to the emini from there.


So rough calculations suggest a 5 lot is needed to cover your nut if you are consistent. Now let's tackle the risk side. How much do you currently risk per contract on your trades now ? What has been your biggest drawdown per contract over your entire trading career?

Also when do you normally trade ?

The reason I ask is you may want to consider a side gig outside of trading to help with expenses in order not to eat up your living expenses. Back in the late 90's I knew a guy who waited tables during the evenings and weekends while he pursued trading a prop firm during the day. This took a lot of pressure off of him to generate income just from trading and after talking to him it actually had a positive effect on his trading psychology. I can tell you first hand the fastest way to fail at trading is to trade with scared money. That is why I suggested you have at least 12 months of living expenses saved up in the beginning.

 

[raVar]

Well, to be fair, on a couple of points?

A) Yeah, I mentioned Tim ... but that's to just illustrate the CONCEPT of scaleability

B) And true, it's a first world problem to have right? I mean, everyone wants to have the problem, that they are scaling out at size, on a market.

Just be aware, it can happen in ways that some don't expect. I know some who scalped for ticks on the /ES, and the way they were reading the flow to do it? Even though the /ES was plenty liquid? They ran into problems with the thickness / thinness of the order book, to be able to execute at the size they did so (They would wait for quiet flow on a key pre-planned structure to scalp). But as they grew and grew in their size? 300 lots ... 500 lots ... it became harder and harder to trade that way. It hurt their performance, and they went to another market that was deeper and thicker (Treasuries)

And it can sort of mess with your head, however it happens.

I know of another case, someone dealing with deep ... high delta Equity options. At a simple $1 M block, they were starting to scale out. They couldn't get their size, because they were literally becoming a size of the market, and couldn't get filled at size. They sorta went a little nutty on it, thinking ALL market liquidity was drying up, and we were headed for 1932. When in fact? They had scaled out of the strategy they were doing.

It happens faster than you think. Tim was just sort of a "metaphor" of the phenomenon, and it DOES happen in other markets.

As a matter of fact, it affected my firms direction. We had a strategy we'd love to use. But unfortunately, it uses the YM, and the size we'd need to put on ... WHEN we'd need to put it on? We just can't use that strategy for even a measily $11 million. It scales out at $10 M. The YM is too thin for it.

Just, be aware I guess, that it's a monster looming out there, and it sneaks up on people in ways they don't expect.

But then again, it's a first world problem to have I guess.

 

[Howard]

It's not a double edge sword if you know your trading methodology has a long term positive expectancy.

It's simple probability and being disciplined.

If you're using too high leverage, you risk blowing your account on a losing streak even if if you have a long term positive expectancy.

The lower your leverage - the bigger your chance of realizing your long term expectancy before going broke.

Increasing leverage increases risk of ruin.

Even with a high win percentage you can still have 5 losses in a row. Or 10. Do that on high leverage and your account goes to zero quickly and you will then have to recover your account on smaller size.

So rough calculations suggest a 5 lot is needed to cover your nut if you are consistent. Now let's tackle the risk side. How much do you currently risk per contract on your trades now ? What has been your biggest drawdown per contract over your entire trading career?

Also when do you normally trade ?

I have a maximum stop loss of 3,0 ES points and I don't trade through drawdown. I have rules to manage that. Anyway, I've done a lot of study on this stuff, so I feel I got this part handled.

My method is developed for RTH (09:30 - 16:00), but obviously, my current job is preventing me from trading it fully.

The reason I ask is you may want to consider a side gig outside of trading to help with expenses in order not to eat up your living expenses. Back in the late 90's I knew a guy who waited tables during the evenings and weekends while he pursued trading a prop firm during the day. This took a lot of pressure off of him to generate income just from trading and after talking to him it actually had a positive effect on his trading psychology. I can tell you first hand the fastest way to fail at trading is to trade with scared money. That is why I suggested you have at least 12 months of living expenses saved up in the beginning.

Absolutely. I will look into that for sure. I could easily work in the weekends or even a 70% job during the weekday. I will probably want to fully focus for a few months first though.

How did things turn out for your waiter friend?

 

[Howard]

As a matter of fact, it affected my firms direction. We had a strategy we'd love to use. But unfortunately, it uses the YM, and the size we'd need to put on ... WHEN we'd need to put it on? We just can't use that strategy for even a measily $11 million. It scales out at $10 M. The YM is too thin for it.

Just, be aware I guess, that it's a monster looming out there, and it sneaks up on people in ways they don't expect.

But then again, it's a first world problem to have I guess.

But does this not prove my point? That you're comparing apples and oranges?

Your firm or fund managers managing similar sums of money or larger can't deploy strategies that a smaller account size can. That's why comparing returns/strategies for an individual trading futures with a fund manager managing billions isn't an accurate comparison.

 

[volente_00]

If you're using too high leverage, you risk blowing your account on a losing streak even if if you have a long term positive expectancy.

The lower your leverage - the bigger your chance of realizing your long term expectancy before going broke.

Increasing leverage increases risk of ruin.

Even with a high win percentage you can still have 5 losses in a row. Or 10. Do that on high leverage and your account goes to zero quickly and you will then have to recover your account on smaller size.



I have a maximum stop loss of 3,0 ES points and I don't trade through drawdown. I have rules to manage that. Anyway, I've done a lot of study on this stuff, so I feel I got this part handled.

My method is developed for RTH (09:30 - 16:00), but obviously, my current job is preventing me from trading it fully.



Absolutely. I will look into that for sure. I could easily work in the weekends or even a 70% job during the weekday. I will probably want to fully focus for a few months first though.

How did things turn out for your waiter friend?

He blew up his account in 2000 confusing brains for a bull market


So let's go back to number crunching

3 point loss

20 stop outs in a row

=$3,000 drawdown per contract


So using 5 contracts you need 15k just for loss capital to survive this drawdown and plus what is needed for margin for each contract


The issue is if you have that many stop outs in a row then I highly doubt your methodology has a long term positive expectancy but that comes back to keeping detailed records of the pat and knowing how it performed. What 95% consider to much work to keep up with

 

[Howard]

The issue is if you have that many stop outs in a row then I highly doubt your methodology has a long term positive expectancy but that comes back to keeping detailed records of the pat and knowing how it performed. What 95% consider to much work to keep up with

I never said I've had 20 stop outs in a row. In fact, after I learned the basics of trading, I've never had 5 stop outs in a row and even still - I rarely take a full stop on a given trade as a stop loss is just a protective measure. No need to wait for it to get hit if you realize you were wrong. Emotionally difficult, yes, but only a newbie sits around hoping for his stop to not get hit.

My point is that a reasonable amount of leverage lets you stay in the game and allow you to realize your expectancy before your account is blown up. That's what I mean by leverage being a double edged sword. An extreme example would be to risk your entire account on one single trade.

That said - I do think it's necessary to take on some initial risk if you trade a small acount, unless you have forever to build your account. But eventually, you'd want to scale down that risk or transfer it elsewhere.

 

[raVar]

But does this not prove my point? That you're comparing apples and oranges?

Your firm or fund managers managing similar sums of money or larger can't deploy strategies that a smaller account size can. That's why comparing returns/strategies for an individual trading futures with a fund manager managing billions isn't an accurate comparison.

It's a fair point.

But here's why I'm telling you this.

It's not a matter of comparing apples to oranges.

It's a matter of warning you what the next step is.

So let's say you join the ranks of professional trader.

Awesome.

You want to know what a nightmare is?

When you can turn consistent profits, year after year? Money finds you. It just does. I wish I could explain it. But other Money Managers have said the same thing. Especially is this true in private relationships.

A nightmare is you've got a great track record, and you raise even more capital. And in the midst of this process someone comes along and wants to deploy $25 Million, and asks if you can prove you've done scaleability testing on your process?

And you don't get the allocation, because either A) You can't scale up, and you know it or B) You haven't tested scaleability, so you lose the money that way.

And you get to watch $25 Million go somewhere else.

Not ...

Fun ...

 

[Jfranco_2003]

No kids. Just a needy girlfriend who feels she sees too little of me.

Tienes que decirle mira marginal ven que te voy a besar esos pies rico. Y así haces que agarre mínimo y sea seria

 

[Jfranco_2003]

- I've been full time trading twice earlier. The last time, I was severly undercapitalized and simply had to quit because I was broke. I didn't 'blow up', but slowly bled to death and had to eat.

- I've been exposed to the markets on/off for 12 years by now and have devoted long periods of time to serious market study and research. I have proprietary tools developed to aid my market analysis and research. So, I'm not new to the markets.

Bro please before trade with your real account achieve at least a month of consistency and profitability in a demo account, obviously like if you were trading with real money and without to discount any lost.

If you haven't achieve to pass the demo test without to mislead yourself saying "In a real account I would not have take this trade", you won't be able to be consistent in a real account.

The market doesn't like people who skip steps in the learning process and if you losted money in your past tryings is because something in your trading is wrong and you need to fix it before to try again.