Micro E-mini Madness (2% per day)

[ElectricSavant]

sstheo...we are not arguing...we are all traders trading with you...your doing fine...this is not your first rodeo...remember that.

es

I am not giving up on the other account. In fact, I should be funded this week or next with Leeloo, and then I will be trading the E-mini's right away on that funded account - which allows up to 15 contracts at a time. But don't be alarmed; I will be using the success of my live AMP account to help me successfully, and prudently, grow the Leeloo account. I will be starting with just 1 or 2 contracts at a time, and adding 1 contract for each $5000 gained. (Sound familiar?)

Instead of closing down this live AMP account after all, as I got closer to finishing the LeeLoo account, I chose to continue to trade it-- there was no reason not to, since the trades are almost identical.

Yes, there is pressure from my wife, but I will manage.

Since I am attracting so much attention on my 2% goal, and my trades are (appropriately) being scrutinized, I will step up the transparency. Doubly so, because I appear to be the catalyst for arguments in my very own journal, which was far from my intent here.

 

[sstheo]

To be honest, I have my doubts as well. I have already shown 2 trades of his that were outside of parameters that he was setting for himself. We have also only seen maybe 5% or less of the trades, so who really knows what the other trades were, and what red flags lurk in there.

Now don't get me wrong, I'm totally rooting for @sstheo , but I'm experienced enough to be able to see the potential speedbumps.

So first it starts with being totally transparent with yourself about the trades. (not saying he has to show us here, but he just has to know for himself). There are probably more trades in there that had a deeper drawdown. He has already shown on Friday how he got it wrong, and although losing $100 is no big deal, it does certainly affect the stats. This is why 2% per day is an impossible dream. Maybe 20 ticks per day, averaged over time is sustainable, and of course when your account gets bigger you increase the contracts, but this 2% is a very random goal and pipe dream in my opinion.

Furthermore, he just stated that he is under pressure from his wife. This is a huge obstacle that I'm not sure can be overcome. If she is giving him a timeline, its pressure that will make it difficult to always make the best decisions.

Plus, we don't know why he gave up on the idea to go with the full contracts in his other account. If its a loss of confidence, then this is a factor that will heavily weigh down on future performance. In fact, his worst date came after the decision to continue with the micros. Are the two related?

Now don't get me wrong, I really, really, really want him to do well. I hope that all these other trades are just like the previous ones and that its just a string of losses that will happen in any statistical system. He has always bounced back, and there is no reason most likely why he cannot again, but this has to be shown.

https://www.elitetrader.com/et/threads/micro-e-mini-madness-2-per-day.335221/page-51#post-4946703

I think this is the post you are referring to when you said I broke my rules. My max stop is set at 40 ticks on the MNQ and MYM. This is $20 for each of these instruments. Perhaps you were thinking I said 20 ticks and not 40?

Here is the originally stated list of rules for my account:

https://www.elitetrader.com/et/threads/micro-e-mini-madness-2-per-day.335221/page-12#post-4917170

 

[sstheo]

I think you shall not

I think I shall do my best to pleasantly surprise you.

 

[sstheo]

I’m glad for him, but any strategy that depends on luck won’t cut it. I shoot the shit on ET for interaction, but at the same time want fellow traders to follow the path with the most certainty, and I mean that sincerely.

I am not sure where the "luck" comes in, except every time I (or any trader) enter a trade it is a matter of probabilities. Is "luck" where preparation meets probability? Or perhaps I am lucky each time I get a profit, because as we all know that sometimes (often?) trades simply go against us, no matter how confident we are in the outcome.

Maybe you are saying that I haven't been clear enough in explaining my methods, so it just looks like luck instead of the "momentum scalping" that I am doing along with "the dream of getting a few bigger trades in from time to time." I will try to be more articulate about my trade entry decisions.

I am a humble trader because I know that tomorrow I may be "Tweet to death." But I can tell you that I am pretty happy with how things have gone so far. I averaged 2% per day for the first 30 trading days. And then my numbers slipped. But I think I can get back. My many years of trading have prepared me to be able to stay alive in this account longer than usual. I even withdrew $500. I have finally learned to keep the risk reasonable and wait for better entries.

I will continue to try to be just as lucky. The future looks bright.

 

[sstheo]

2% strictly over the original capital is probably not very difficult, namely for a $5000 account to get $100 daily average, and when the account increases to $10000, $20000, you still aim to get $100 on average daily, then you got a much larger leeway and buffer to sustain the DD. For $5000 account you can trade 1 NQ (or ES), and you need to get 5 point for $100, and there are always 5 points move and mostly multiple times during every single day (or most days), and someday if you catch 1 or 2 trades that spanned 10 or 20 points, you got the whole week profit covered, and again there are always at least 1-3 days during a week that it would produce 10 - 20 point movement.

However, to get a compound 2% is probably not very easy, as you have to constantly be in a good condition to compete every day, and when the account grows to much higher capital, every DD of 5% or so hit a bigger hole and takes longer to recover. When the account gets bigger, say to 1 million, then you would have to trade 200 lots (based on the ratio of $5000 on 1 lot), and that put a lot of pressure on the trader, say a 2 point fluctuation (that happened almost within every 1 to 5 minute during the active trading hours) in the opposite direction would put a hole of $8000 on the account, you need to have a strong mental to follow your plan if you have confidence in its outcome. However, one can always reduce the lots, or say, when you get to one million, put half million away in a saving account, and just play with the other half mil with 100 lots, that give you some peace of mind that if you lose all in that trading account, you still have the half, and then you can configure a safer strategy to re-start again, as trading is a constant learning and evolving endeavor. Better yet, if you want really risk under control, use future option strategy, each time you play $10K (10 to 20 lots option on ES or other Emini) and when you lose 50%, you exit, then you have 100 chances (50X2), you blow your account only when you lose all 100 trades consecutively , and that is probably not going to happen to experienced trader like you.

But all in all, compounding is the dream of all traders and even investors (or most of them), isn't it? I believe most people heard about Einstein's (or may not him) comment on the 8th wonder about compound interest.

2% per day certainly has its limits as you have well expressed. I aim to get to $10k on this micro account. The 2% per day is a distant second objective. If I can get to $10k without blowing up, then I will have succeeded. I will then move on to the E-minis. With 2% per day I would certainly make a boatload of cash with the E-minis, but mentally I can see that I may become more risk adverse once I am on the E-minis on my own live account. But I would really like to take that $10k to $100k, the same way I am trying to take this $1k to $10k.

The magic in this whole experiment is the GRADUAL strengthening of my proper reaction to the fear and greed demonstrated in the markets. By going up 1 micro contract at a time, I am expecting that I will be much better prepared and more profitable eventually than someone who starts with $10k (or $100k) and expects to grow it quickly without blowing up.

 

[Seaweed]

https://www.elitetrader.com/et/threads/micro-e-mini-madness-2-per-day.335221/page-51#post-4946703

I think this is the post you are referring to when you said I broke my rules. My max stop is set at 40 ticks on the MNQ and MYM. This is $20 for each of these instruments. Perhaps you were thinking I said 20 ticks and not 40?

Here is the originally stated list of rules for my account:

https://www.elitetrader.com/et/threads/micro-e-mini-madness-2-per-day.335221/page-12#post-4917170

I see on my post I goofed a bit when I mentioned 33 points on the NQ chart, but clearly that is ticks, not points.

At any rate, I converted the ticks/points to a dollar value. Since you said for the new account you would tighten up the stop to $100, I then went looking for trades where it would have been more than $100 (if you traded the mini contract and not the micro). On the NQ, that is only 5 points obviously, or 20 ticks. So if for this experiment your max loss was set to 40 ticks, but for the new account you were going to use 20 ticks, that meant the stats gained from testing weren't going to reflect the way you were going to trade.

So all I was getting at was that your experiment had you average 2% per day, but going forward, the trading was going to use a different set of parameters, which would invalidate the stats you collected.

 

[sstheo]

I see on my post I goofed a bit when I mentioned 33 points on the NQ chart, but clearly that is ticks, not points.

At any rate, I converted the ticks/points to a dollar value. Since you said for the new account you would tighten up the stop to $100, I then went looking for trades where it would have been more than $100 (if you traded the mini contract and not the micro). On the NQ, that is only 5 points obviously, or 20 ticks. So if for this experiment your max loss was set to 40 ticks, but for the new account you were going to use 20 ticks, that meant the stats gained from testing weren't going to reflect the way you were going to trade.

So all I was getting at was that your experiment had you average 2% per day, but going forward, the trading was going to use a different set of parameters, which would invalidate the stats you collected.

That makes sense, thanks.

While I am using a 40 tick max loss on this micro account, I see I need to really finalize the max loss for the Leeloo account, assuming I get funded soon. You correctly extrapolated saying I would be changing things from my micro to the E-mini's if I make the stop 50% smaller.

While a fixed loss is really easy, I am considering an ATR stop loss. This would be adjusted daily based on the previous day's action. It would be something like 20% of the previous day's range. It could be 15 or 25, or 30. I can't imagine more than 30%. Again, this would be the max emergency loss, and I will still do my best to get out sooner if I think "the reason for getting in the trade" has disappeared.

 

[Overnight]

That makes sense, thanks.

While I am using a 40 tick max loss on this micro account, I see I need to really finalize the max loss for the Leeloo account, assuming I get funded soon.

You will get funded soon if you stop mucking about and keep on with what you are doing.

I am considering an ATR stop loss. This would be adjusted daily based on the previous day's action. It would be something like 20% of the previous day's range. It could be 15 or 25, or 30. I can't imagine more than 30%...

Hmm, that could be dangerous? For example, look at the couple days before Friday, and then look at Friday. Friday ATR was quite different from the previous few days, no?

 

[Seaweed]

While a fixed loss is really easy, I am considering an ATR stop loss. This would be adjusted daily based on the previous day's action. It would be something like 20% of the previous day's range. It could be 15 or 25, or 30. I can't imagine more than 30%. Again, this would be the max emergency loss, and I will still do my best to get out sooner if I think "the reason for getting in the trade" has disappeared.

Once again, none of this you have used for your live trading. Dude, your live trading results are stellar, and impossible really to maintain in my opinion.

Every version of a stop has pros and cons. I like fixed stops cause it makes the math easy for stats, no thinking involved, gets you out of the trade, and you move on. ATR based stops can work better for times when volatility changes, but here, the stops might almost be too big. 20% of a 100 point NQ range is 20 points or $400 dollars! If you plan to trade like you were before, these won't be quick trades.

A price action type stop, like above or below a major swing point is even better in my opinion, but now you have to worry about where you got into the trade cause the swing point might be far away. All of these will take more testing.

So that brings me to this question. What is wrong with what you were doing? We saw only a small sample of your trades, but are there any skeletons lurking there? It looks like all you were doing was developing a feel for the market and putting on a trade. Nothing wrong with this, so why not just continue? What is it that you are trying to improve and why are you trying to change? We are all trying to tell you that 2% per day is extraordinary, and yet you seem to want more. This will be your downfall.

I suggest you go one more month doing exactly what you were doing. If you can replicate last month, then go one more month. And so on and so forth. This is trading. The daily, weekly, monthly grind. Making 30 to 40 ticks average per day is stellar performance. Don't fuck with it, but see if you can maintain it.

 

[Overnight]

...

I am a humble trader because I know that tomorrow I may be "Tweet to death."...

Don't I KNOW IT about the "tweets to death". The tweets have humbled me and have turned my trading style on my head and so I am trying to adjust.

...The magic in this whole experiment is the GRADUAL strengthening of my proper reaction to the fear and greed demonstrated in the markets....

There is no fear or greed in the markets. The fear and greed is only in your head. It is YOUR fear and greed that you sense. The market is your world, but your mind interprets that world.

Don't change a thing. Don't rush things!