Quote from candletrader:
20% high to trough drawdowns on my equity curve are not uncommon (this is the result of choppy periods when even my scalping sucks and/or when I step up size outside of what many people would regard as sensible money management)... thankfully, the equity curve is in an uptrend (kind of), so such drawdowns don't phase me... commissions are around 25% of my gross (alarm bells start to ring if commissions rise to 33% of my gross), cos I do quite a bit of scalping alongside less commissions-intensive strategies...
As I have previously mentioned, 1pt to 1.5pt per contract is on the high side relative to most of my highly consistent online buddies (who, without a single exception, are averaging considerably under 1 point a day with, I am sure, beautifully smooth equity curves)... I pay for the relative outperformance through some often rapid and wild drawdowns on my equity curve... many people wouldn't be able to stomach such DDs, but I believe in the long-run potential of what I have been doing, so I try and not let DDs phase me...
Brother Candletrader!
Regarding the 20% dd's - May I ask what kind of stop-losses you use? You must be using stops in excess of 2-3 pts in order to do that? I would never accept such hight dd's, I'd believe they'd wipe me out eventually! And/or do you use high margin? This probably is the issue. (As discussed in my previous post)
Maybe you should look out for shorter timeframes? I tend to not to be willing to risk more than 2% per trade, I.e. when I scalp, I would not take into account more than 6T (8T/2pts including slippage), which is 2% risk on my $5k-pc rule (which I use when I'm scalping).
Do you trade reversals or trends/retracements? What's your style? If your risks are so high, you might lower it by trading (short-term) retracements, since stops are very small.
Retest-failures off daily highs/lows, particularly if supported through Stoch/RSI (double/triple) divergences or even price projections can also be very profitable and have a high R:R.
Particularly during the typical S&P reversal times.
I would also recommend that you always monitor and chart at least the NQ, if not even the YM next to your ES - To look for correlation, but also to maybe enter a trade in these issues if the setup is better than the ES - Often the ES don't "quite get there" on i.e. a retest-failure.
Correlation, to me, is extremely important when monitoring the ES. While I mainly trade the ES (liquidity, lower commissions), it is technically rather random compared to the NQ, for example.
I've run countless tests and systems on both, and figured out that the NQ are a lot more "technically reliable". Even if you have a look at programs like OT (OmniTrader) that generate automatic trading signals by testing hundreds of TA indicators, you get staggering results on the NQ, while it doesn't seem to spit out much at all in returns on the ES!
Many people poo-poo OmniTrader. I found that if you have very good knowledge of TA, you can do amazing things with it. Now you can even develop trading systems in it! I think in terms of systems development, it will soon beat TradeStation, the way eSignal just has and WealthLab -long- has.
Anyway, I would personally say that NQ is much better to trade with a purely technical/mechanical trade-system and ES is better suited for "discretionary trading".
However, if you're trading "discretionary", then the ES are better, since mechanical systems don't get such a good bite of it's opportunities and "human discretion" rules on the ES. Also, the NQ are a "leading indicator" for you if you're trading the ES, since the ES are "following" the NQ.
The reason, as we know, is that the YM is the primary market, while NQ is the speculative market and the ES find themselves "wedged" right in between...
Also, you said that commissions take a lot of your deal? You might be able to negotiate professional rates!
Are you with IB? If you're doing more than 350CRT (contract-round-turns), which would be 35RT on 10 contracts per month,
it would be worth going with i.e. RemotePro by FFasttrade, which offers you $3.32/RT rather than IB's $4.80/RT, so you'd be saving $1.48/RT!
If you're doing just 5RT per day on 10 contracts, you'd be saving yourself $74/day - $1,480/month - $17,760/pa
If you're doing (scalping-style) 20RT per day on 10c's, you'd even be saving $296/day - $5,920/month - $71,040/pa!
Only downside is that you've to shell out $550/month for the platform. However, if you're doing high-volume (>350CRT/M), it could be worth it.
FFastTrade also claim that they've got the fastest execution and feed in the industry. Ask them about it.
It would be good to find out if there are better rates out there. As soon as my volume gets to the next higher level, I'll certainly try to negotiate more. Remember - At the end of the day, they all want your money! I think there's a chat about this issue on ET on Tuesday.
Yours Sincerely,
~The Scientist
Alter Ipse Amicus. - <i>A friend is another self.</i>
On the same thread Scientist says he makes 2pts per contract per day on average. :eek: