How many contracts to trade?

[bone]

i would say that in general your very correct about this but i would say the guys who makes the most risk vs reward (profit factor) are still doing it manually.

I agree with everything you say. The big problem I have been seeing is that firms are very risk averse these days. They simply don't like the big swings that manual outright traders take.

 

[p0box4]

i would say that in general your very correct about this but i would say the guys who makes the most risk vs reward (profit factor) are still doing it manually.

i have spent all my life in automated trading but i have never seen anything match the power of a human when it comes to trading. including ren as badass as they are there are traders i know who smoke them.

there are some things that just can't be explained, but in general yes bot's will out do a human every day.

You are right about that, however automated systems also do not have the big draw downs as most humans have with such high risk strategies. It's all about consistency and that is where machines outperform humans on the long run.

 

[bone]

You are right about that, however automated systems also do not have the big draw downs as most humans have with such high risk strategies. It's all about consistency and that is where machines outperform humans on the long run.

Yes and no. What you said is 100 percent correct, but there are actually quite a few exceptions when it comes to the top tier proprietary trading firms. I'll give you a few great examples - DRW's cryptocurrency desk. It takes more than automation to make that thin disjointed arbitrage work.

Ronin's Natural Gas Swaps desk - they simply can't make markets to OTC brokers using automation.

TransMarket's longer term yield curve spread traders. Automation is less relevant when you are holding trades for days instead of seconds.

And I can think of dozens of other examples where automation is limited in its application when it comes to the top tier prop firms.

 

[SunTrader]

All it is a way to avoid risk of ruin while maximizing your returns. Im not sure what you mean by publishing his results? Results from what?

He's praised by everyone from gamblers to traders for good reason. Thorp used it. That should say a lot.

Results as in trading profits. Like I said a theory guy.

BTW yes I know Ed Thorp use it. Used to use it. Thorp unlike Kelly trades (or did, very successfully before retirement). Read his book. He gave it one mention on page 129. Though I think his results were from a loooot more than Kelly.

 

[trade2020]

I have tried it several ways,

it really comes down to what is the max you are willing to risk per trade on your stop

If you have a daily loss limit of $2,200 and trailing max drawdown of $3,500. I dont like to use the full daily loss limit as that can be trick because you will forget about the commissions and slippage and if slightly go over $2200 because you forgot about also figuring those into the equation then game over and you have to reset. Also I feel it is better to use a daily loss limit that is less than 50% of what the max trailing drawdown limit is - in this case the max trailing drawdown is $3500 so 50% is $1750 (however that doesn't include commissions and slippage so that is how I arrive at $1500)

So with a daily loss limit of $2200 I figure my trading loss limit will be $1500 max which leave me a cushion. So I have $1500 to work with.

If my stop loss is $150 per contract then

--if I trade 1 contract per trade which risks a total of $150 per trade then I can take a total of 10 trades - if I lose each one for max loss pf $150 per trade that is $1500 loss for the day (not including commissions and slippage)

--if I prefer to trade 2 contracts per trade which risks a total of $300 per trade then I can take a total of 5 trades - if I lose each one for max loss of $300 per trade that is $1500 loss for the day (not including commissions and slippage)

--if I prefer to trade 3 contracts per trade which risks a total of $450 per trade then I can take a total of 3 trades - if I lose each one for max loss of $450 per trade that is $1350 loss for the day (not including commissions and slippage)

--if I prefer to trade 4 contracts per trade which risks a total of $600 per trade then I can take a total of 2 trades - if I lose each one for max loss of $600 per trade that is $1200 loss for the day (not including commissions and slippage)

--if I prefer to trade 5 contracts per trade which risks a total of $750 per trade then I can take a total of 2 trades - if I lose each one for max loss of $750 per trade that is $1500 loss for the day (not including commissions and slippage)

--if I prefer to trade 6 contracts per trade which risks a total of $900 per trade then I can take a total of 1 trade - if I lose that trade then it is a max loss of $900 for the day (not including commissions and slippage)

--if I prefer to trade 7 contracts per trade which risks a total of $1050 per trade then I can take a total of 1 trade - if I lose that trade then it is a max loss of $1050 for the day (not including commissions and slippage)

--if I prefer to trade 8 contracts per trade which risks a total of $1,200 per trade then I can take a total of 1 trade - if I lose that trade then it is a max loss of $1,200 for the day (not including commissions and slippage)

--if I prefer to trade 9 contracts per trade which risks a total of $1,350 per trade then I can take a total of 1 trade - if I lose that trade then it is a max loss of $1,350 for the day (not including commissions and slippage)

--if I prefer to trade 10 contracts per trade which risks a total of $1,500 per trade then I can take a total of 1 trade - if I lose that trade then it is a max loss of $1,500 for the day (not including commissions and slippage)

My preference with the above math is to trade 2 contracts per trade - risking $150 per contract ($300 per trade)

OK. Assuming you pass any of these combines, tryouts, etc. - how many contracts would you trade as a max position size? Would you go with whatever the firm gives you? I mean - 15 lots in ES or GC or CL with a max drawdown of $4,500 - is that not completely insane? In other words - can you be a professional trader starting out with a $4,500 drawdown limit?

 

[Peblo]

I think even with $300 per trade that is too much risk with a max drawdown of $3,500. It is easy to take 10 losses in a row and then you are pretty much out of the game.
I choose 2 contracts max (1 as default or starting size to which I sometimes add) (FESX, ZN) and a custom daily loss limit of $550. I will do it with TST ($4,500 max drawdown) and SMB ($3,000 max drawdown) until my drawdown (including profits held in the account) reaches $15,000 when I will increase to 4 contracts max (2 as a default size) and a custom daily loss of $950.
Now just have to have discipline and patience to EXECUTE!

 

[trade2020]

Mine is $150 per contract ($300 risk per trade on trading 2 contacts)
because it is on trading the S&P 500 emini which is $50 a point. Sometimes I’ll just make it $125 a contract which is 2.50 points
Anything tighter than that on S&P 500 doesn’t really work that well

You are trading something else like the Euro so of course the risk parameters on trading that will be different

I think even with $300 per trade that is too much risk with a max drawdown of $3,500. It is easy to take 10 losses in a row and then you are pretty much out of the game.
I choose 2 contracts max (1 as default or starting size to which I sometimes add) (FESX, ZN) and a custom daily loss limit of $550. I will do it with TST ($4,500 max drawdown) and SMB ($3,000 max drawdown) until my drawdown (including profits held in the account) reaches $15,000 when I will increase to 4 contracts max (2 as a default size) and a custom daily loss of $950.
Now just have to have discipline and patience to EXECUTE!