ES Journal - 2017/2018

Status
Not open for further replies.
Reader---I'll show an example of margin usage here. It will be generic, but you'll get the idea. For this example, we'll use an ES contract size of $100,000. (it's a little more than that currently). We'll also assume a trading account size of $100,000
-----So, for a trade with 10 X margin, you would need to trade enough contracts to control $1,000,000 worth of ES. That would be 10 contracts (10 time 100k equals 1 mil).
----A trade with 4 X margin, you would need to trade enough contracts to control $400,000 worth of ES. That would be 4 contracts (4 times 100k equals 400k)
 
Therefore a trade at 10 X times margin that makes 5 points, would be a total of 50 points and a trade at 4 X margin that makes 5 points would be a total of 20 points.
-It therefore follows that the same is true for trades that lose those same points.
--So the 10X margin trades carry 2.5 times more weight than 4 X margin trades.
 
It can be seen then that a 4X trade losing 30.25 points using our established generic numbers earlier, would be a loss of 121 points. ---and a 10X trade would only need 12.1 points to make up the difference and breakeven.--exclusive of commissions of course.
 
This is why even though trades on a per contract basis show a loss for the year, the margin usage actually results in a positive result so far in 2017.
 
We are 32 points higher from the buy signal I called out on Monday. If I had traded that signal with 4X margin, I would still be in, but would just now be getting to the gains I achieved by pulling the plug yesterday on the 10X margin trade.--Of course I could have just stayed in with the 10X and really done well, but over the long haul, rules told me that the positive move was to pull trade.
 
In other words, normally we would have some pullback and I could re-enter with the 10X trade. If I had been in the 4X trade, I could have just held and let it pullback and rode it higher due to less risk. This time we really didn't have the pullback except overnight and I don't sit up all night watching charts.
 
Buy1Sell2 said:
Reader---I'll show an example of margin usage here. It will be generic, but you'll get the idea. For this example, we'll use an ES contract size of $100,000. (it's a little more than that currently). We'll also assume a trading account size of $100,000
-----So, for a trade with 10 X margin, you would need to trade enough contracts to control $1,000,000 worth of ES. That would be 10 contracts (10 time 100k equals 1 mil).
----A trade with 4 X margin, you would need to trade enough contracts to control $400,000 worth of ES. That would be 4 contracts (4 times 100k equals 400k)
More...

My system uses similar calculations when deciding on the position size. I think a more correct term to use in this case is "leverage", not "margin".

So, in your example of account size of $100K and the ES contract size of $100K, the position of 10 ES contracts would mean 10:1 leverage.
 
nonlinear5 said:
My system uses similar calculations when deciding on the position size. I think a more correct term to use in this case is "leverage", not "margin".

So, in your example of account size of $100K and the ES contract size of $100K, the position of 10 ES contracts would mean 10:1 leverage.
More...
Correct. It's semantics. I use the term margin simply because I create my own margin. I never look at exchange minimums.
 
A loss 30 points ES at 4X would be 120 points or $6,000. This would represent 6% of the trading account, but only 1.2 % of TLNW. --Calculations on total risk are always taken against TLNW.
 
Status
Not open for further replies.
Back
Top