From Micros to Millions: 2% per day

[tiddlywinks]

@CALLumbus

Completely agree that overall knowledge is important, and sometimes can have a huge impact down the road or immediate, based on only the existence of such info. In that regard it is worth mentioning.

On the internet, and ET, there is major disconnect between when a student thinks they are ready, versus when a student is ready and a teacher appears. Pointing out and even dissuading is also knowledge/info worth mentioning, assuming there is at least perceived experience behind such advise.

 

[sstheo]

Thanks sstheo for the response.

5% is a good approach. This is better than stop trading after fixed dollar amount or XX amount of trades.

Question please:

1. What percent do you risk per trade per day?

2. How did you determine 5% day max daily drawdown? I need to incorporate such a money management in my trading as well.

Thanks,

Great questions.

1) Thanks for the nudge to formalize this important number, especially since the mini's will be added to my tool bag soon. I have been doing bigger, but I am now looking at a max of $10 on each micro traded and $100 on each mini. It looks like this:

• 8 ticks (2 points) on the ES/MES.
• 20 ticks on the NQ/MNQ, YM/MYM, and RTY/M2k

I hate losing, but disaster looms for those who play with fire. If I am wrong, I want to be out quickly. As mentioned previously, if I get in a trade and it goes nowhere, I will often just scratch out and reevaluate.

Instead of an easy # of ticks stop, I could do an ATR stop or Support/Resistance stop, but the bottom line is I need to keep this simple. With 20 to 40 trades in a day, I need simplicity.

My 89% win rate will drop, but I think the outcome will be much safer, and potentially more profitable as I will be out of losing trades sooner.

IF we get into another situation like we were in in March, then I will scale back to 1 or 2 micros only and increase my stops again. The volatility was mind-blowing as you recall.

2) I determined Max daily DD of 5% by looking at my current balance and thinking about my pain point (currently $350 loss on $7000 balance) and a nice number I could calculate quickly ("1/2 of 10%" is easy for me). I am working on automating the day max loss.

 

[sstheo]

You guys are hilarious!!

CME membership non-refundable fee ($2000)
+ monthly lease fee
+ capital gains taxation
- trading business/admin expenses
+ 15.3% self-employment taxation.


Meanwhile, OP hasn't surpassed tier 1 volume, in micros!!
Yea, time for a CME seat lease... LOL

Love the pic. The lease does seem a bit premature... I will look again once/if I cross the $20k mark.

 

[sstheo]

If a trader made a 1 percent return every trading day on $100K and reinvested the profits, how much would he have in one year?


Alister A
, Quant & Analyst
Answered June 20, 2018 · Author has 55 answers and 121.5K answer views

If you use 220 working days as a basis then $892,693.20, or nearly a 900% profit, that’s about what we achieve however you have a scaling issue, much to everyones disbelief you cannot just compound ad-infinitum, there are levels in the financial system and once you hit them returns stay static and even fall.

The other problem is that compounding every day causes accounting and psychology trauma, more realistically you keep the profits static on a weekly basis and compound the following Monday, this is what we do. With that method you will generate $703,998.90 after 40weeks, which is how our funds trade, or nearly 700% profit, even though the profits are only 20% lower the psychological levels are 80% less and therefore you are more likely to achieve this.

Most go for the first route and therefore never sustain the profits more than weeks or months if they are lucky and the wind is blowing in the right direction. We have higher daily percentages and lower trading volume, which nets out to 95% reduction is psychological stress, but requires a complex set of dynamics to achieve it.

Thanks for posting. I was guessing that there are several different limits that come into play, both psychological and market related. "Psychology trauma" sounds pretty severe... Interesting ideas about compounding weekly instead of daily, and going for higher daily percentages with lower volume.

 

[sstheo]

One or more posters have asked "What is your edge?" My journal is about (1) money management, (2) position sizing, (3) being consistent, and (4) having a goal. But none of these are worth a hill-o-beans if I don't make a profit!

So here goes. Each of these could have an entire book written about it. But here is my condensed version.

Based on the really tough feedback so far on these pages, some of you may say, "nothing special." And I would agree. We all have different ingredients in our trading cakes, but this is MY recipe with a very special blend of ingredients. I really love my carrot cake recipe.

Here are the first 5 of 10:

1) Horizontal Support & Resistance & Trendlines. The value of S & R lines, is probably the only thing that doesn't change on this list. This will always be #1 for me. They are the embodiment of human emotion. The desire to be at "break-even" is so strong that trapped traders who have been under water for a while on a trade will often get out close to their entry to "feel whole" again. This is usually what creates the strong reversals at key points. I am a top/bottom/reversal hunter who is constantly thinking about "Who is in pain right now?"

This is from today. Notice the rectangle. The people who got long here were upside down as much at 30 ES points! What did they do when price finally got close to the entry again? "Whew... I am outa here!" is what they said. And down we went again. This happens on all time frames every single day.

2) Moving averages, especially the 50 sma. Moving averages are sometimes called "Dynamic Support/Resistance." Check out the 60 min ES chart from today. If this doesn't get your inner-trader salivating, I don't know what would. Crazy man! You gotta watch the MA's!

3) Range Trading. The market is ranging 70% of the time. Here is my method to scalp the ranges. (I wrote this on MQL5 almost 8 years ago https://www.mql5.com/en/forum/10647
Despite all the crazy moves, look at these ranges from today. What is your range trading strategy?

4) Internals: NYSE-Tick. My 1 minute $Tick indicator with a 30 ma Keltner band helps me see emotional highs and lows in the market. This is my fear and greed indicator. When we get above 600 or below -600, then I start to look for reversals. Barring the fed talking-- at the extremes the market moves are unsustainable most of the time. Mmmm, this is a great one.

5) Internals: Up volume/Down volume & Advance/Decline There are different way to visualize this data, but these essence is that the underlying strength of the market can be seen because the red line is above the green line on both charts. Today was a down day both in price and in the internals, as you can see. Of course a late day rally didn't change the fundamental internal participation.

Next up:

6) Cumulative Delta
7) VWAP
8) Entering in a pullback
9) Break of Two
10) Volume Profile: Value Area and Point of Control

 

[sstheo]

Correction to #5 above:

5) Internals: Up volume/Down volume & Advance/Decline There are different way to visualize this data, but these essence is that the underlying strength of the market can be seen. Today was a down day both in price and in the internals, as you can see because the red line is above the green line on both charts. Of course a late day rally didn't change the fundamental internal participation.

 

[DeltaOneFutures]

hitting the daily wins is not that hard. it's when to stop when you hit the intraday losing streak that's the hard part. when you lose, can you stop? or the fact that your win streak will push you mentally to keep trading?

that's where my biggest losses come from..just can't stop trading after losing streak. it's not even the size to be honest with you.

No point stopping during a drawdown unless your judgement is affected. The drawdown could continue from whichever arbitrary point you decide to resume trading. Losses are always a possibility until you quit for good.

From the statements and live streams you've posted, it seems your discipline is very good. So you have 1 important ingredient for success.

It's great to see what can be achieved with just discipline and some favourable market conditions. Good run, I just wish you'd realised the risk of the form changing and therefore not risked all your gains.

Unfortunately the prognosis is not good as I can see what you don't understand from where you trade. Not an invitation to give info out, it's stuff I've NEVER seen publicly discussed. But it's real - and not perceiving it is fatal to short term trading ambitions.

Time to consider moving on? If not, private study not trading is in order. If you ever brush up against something (not TA) which works and has never been publicly discussed it may be worth to reconsider, as at least it seems your personality is suitable. But without the correct information, no go. You posted a comment or two earlier this year which made me think you'd stumbled on a fruitful path.

Not gonna hand info out - be real no-one would. Hints won't help either. But what you want is "out there". Good luck.

 

[sstheo]

Had some losses in the downturn yesterday but made up for them in the bounce back. Up $161 net yesterday.

Something interesting happened last night. Now that I have decided on my fixed stop, I feel somewhat liberated with fewer decisions to make. And in fast-moving markets, I can see my win rate will be significantly lower.

 

[sstheo]

I was reminded this morning that the volatility on the NQ/MNQ is too high for a 20 tick stop ($10 on MNQ). I will change it to a 40 tick stop ($20 on MNQ), and only ever use trade 1/2 the contracts I would on the other 3 instruments.

So my stops are official now and set in my system.

• 8 ticks on ES/MES
• 20 ticks on YM/MYM
• 40 ticks on NQ/MNQ (1/2 position size)

 

[.sigma]

The previous chart shows perfectly why I added some volume analysis to my charts. There are things going on behind the scenes that are very valuable. Cumulative Delta and On Balance Volume are so amazing, and they improved my changed my trading completely. If you decide to use them, you only need one of them. I may write more about them later.

please do!