ES Trend Following

[Bombardier]

Quote from Laissez Faire:

You continue to inspire, Bombardier. Excellent performance!

Are you still trading only one contract? Do you have a plan for scaling up eventually? Did you test your strategy on other markets as well?

Keep up the good work.

Thank you, Laissez Faire. Still trading one contract only, but I've been considering to upgrade soon. My method is sound, so it seems that it just depends on my own readiness. I'm slightly reluctant due the sudden jump in dollars risked per trade. Two or three bad trades would already severely impair my gains. I would treat the 2nd contract similarly to what mastacoli71 demonstrated by having a tighter stop. Goal is to be out as soon as the secondary trend (defined in an earlier post) has been broken, and continue to follow the primary trend with the remaining contract.

I haven't looked at other markets because my impression is that they all correlate (reversal patterns at the same moment). So trading the ES correctly would be sufficient enough for me.

 

[HurricaneUS]

Quote from Bombardier:

Thank you, Laissez Faire. Still trading one contract only, but I've been considering to upgrade soon. My method is sound, so it seems that it just depends on my own readiness. I'm slightly reluctant due the sudden jump in dollars risked per trade. Two or three bad trades would already severely impair my gains. I would treat the 2nd contract similarly to what mastacoli71 demonstrated by having a tighter stop. Goal is to be out as soon as the secondary trend (defined in an earlier post) has been broken, and continue to follow the primary trend with the remaining contract.

I haven't looked at other markets because my impression is that they all correlate (reversal patterns at the same moment). So trading the ES correctly would be sufficient enough for me.

Average Loss Trading 1 Contract / 2% = Your Required Account Size to move up to 2 contracts

This will keep you out of trouble.... guaranteed.

Edit:
caveat: ...provided your system continues to perform as it has in the past

 

[Laissez Faire]

Quote from Bombardier:

I'm slightly reluctant due the sudden jump in dollars risked per trade. Two or three bad trades would already severely impair my gains.

I hear you, brother. It is a good thing that you are cautious and not as reckless as me. I once gave back an excellent winning month by scaling up too much, too fast.

You started out with $10 000 dollars, right?

If you allocate for example $10K per contract, you could start trading 2 contracts at $20K, but it may be smarter to be more conservative and not trade 2 contracts until you are well in the money, say $25K for two contracts. Or even wait until you hit $30K.

And then reduce risk if you should fall below $20-25K. Facing even a very short losing streak on increased size is never fun, but I believe the key is to try and think in terms of percentages, have ample amounts of margin and then reduce risk as needed.

Just some ideas that you probably already got in your plan.

 

[gmst]

Quote from HurricaneUS:

Average Loss Trading 1 Contract / 2% = Your Required Account Size to move up to 2 contracts

This will keep you out of trouble.... guaranteed.

Edit:
caveat: ...provided your system continues to perform as it has in the past

With a system as good as this, risk per trade should be at least 5% of your trading account

 

[HurricaneUS]

Quote from gmst:

With a system as good as this, risk per trade should be at least 5% of your trading account

It really depends on the risk tolerance of Bombardier.


1% - Very Conservative
2% - Moderately Conservative
5% - Somewhat Aggressive
10% - Very Aggressive

 

[Daal]

Quote from Bombardier:

Always physical stops placed in the market. For both the protective and the trailed stop.

Problem with these stops is that news algos can produce massive fakeouts on key market events. You could be right but endup getting caught in a fakeout

 

[Bombardier]

This was great input. Currently the risk per trade on average is 14.03 points, or $701.5. Let's say my risk profile is moderately conservative to aggressive, I'd use HurricaneUS's calculation and come up with an ideal account size of $14,030 (at 5% risk) to $35,075 (at 2% risk). At roughly $27k, I'm just in between and theoretically ready for a switch. I'm going to wait until I reach $30,000 and do the upgrade. If the account drops back to $25,000, I will switch back to 1 contract.

Here are the updated performance figures:

 

[Bombardier]

Quote from Daal:

Problem with these stops is that news algos can produce massive fakeouts on key market events. You could be right but endup getting caught in a fakeout

Yes, I'm aware of this issue. Nevertheless, I figure that the market does not violate trend patterns so one must detect them accurately enough. Same for the stop placement, which may not be at any random peak or trough, but at decisive junctures. On the printouts dating back to 2009 and during my live trading I cannot recall having had an incident of being faked out of a trade.

 

[Laissez Faire]

Do you follow and monitor the market 24/7 for entering and exiting positions or are there certain time periods, like RTH, where you manage your system?

I look forward to keep following this journal and it will be interesting to see you scale up to your second contract. I believe the second contract is always the hardest, since you are doubling your risk in dollars. Adding the subsequent contracts is different, since the risk in dollars is proportionally smaller for each contract.

 

[OddTrader]

Very impressive results, and a great thread indeed!

Just would like to know your performance stats such as Average annual returns, Sharpe, MaxDD, etc. , in addition to your backtesting and realtime charts.

Thanks.

Quote from Bombardier:

Daal, I haven't automated my strategy, and have no intention to do so at this moment. Unfortunately, I'm lacking the programming skills. But I did a backtest before going live and documenting my trades in this journal. Find the plot of altogether 73 trades (round turns) attached. This is all trading with 1 ES contract throughout the 2 year span. It resembles the performance I yielded so far here. The tactics are based on the printouts I made of 1H intraday charts, but most of all my philosophy about the battle of bulls and bears behind the price action (I seemingly can't link the direct post, it was posted on 10-05-11). A breakout is bought and the stop is trailed as the trend evolved until you are either stopped out or a breakdown of support occurred to reverse. The stop is then trailed again until the position is stopped out or reversed.