Did one last trade for the month. I had not planned on doing anything today, but this mornings large gap convinced me to stick around and see if there would be any continuation to the upside as the statistics suggest there would be. After the econ numbers the market rested nicely just under yesterdays highs. A breakout above 1127.5 in the NQ would set up a trap, which is the most powerful setup I track. The high of the basing action was 1126. Took long positions from 1127. Generally speaking the traps will take off fairly quickly, so I was not expecting to run into the situation I have now, that being Im in a trade that looks great..but I have to leave (thus close it)
Nov 27th.
NQ (Long) on trap setup 1127. Out 1132.5 Gain of 5.5 points.
Gain after commissions (Commissions $6 per round turn) $104.
Daily return (assuming 10K margin per contract): 1.04%
Monthly return (after commissions): $1008 per contract traded.
I trade one contract per $10,000 in my account. This is what I feel is a prudent number for most people, though I think you can go as much as 1 per $5000 if you are more aggressive. In anycase, I have now hit my goal of 10% per month with a return of 10.1%.
One of my biggest pet peeves in life is that there are a number of people who are led to believe three things, each of which are false and lead to heavy losses. First, they are lead to believe that you should trade a number of times a day. I think it is evident from my journal that while I am pretty much of a scalper, it is not required to trade tens of times a day. This leads to your transaction costs eating you up. Once you become efficient it is about the size of your quality trades, not the quantity of trades taken. Second, you don't need to make 20 points a day to make a living in the market. Many people have told me they make 20 points or more (per contract) per day, yet not a single one of these people have been willing to produce anything that proves this to be the case. Never the less, many new traders look at the charts, and in retrospect it seems very easy to pull 20 points out each day. They strive for a goal which is not going to be hit, and in the process make all kinds of other mistakes that ultimatly hurt them badly. Third has to do with margin. Trading 1 contract for every $10,000 in your account, you can not get hurt too badly, and you are still able to nicely take advantage of the margin. I have seen too many people go with brokers who let them trade intraday for $1000 or less and blow up in a day or less. Leverage is great, but its a two edged sword, and the edge that can get you is the sharpest one. Misuse of margin is one of the most dangerous mistakes I have seen people make. Unfortunatly, most people won't believe this until they experience it themselves. But that doesnt make it untrue anyway. A goal of 10% per month is attainable as I have shown here provided you are patient, wait for your opportunities, take them when they come, and are disciplined in all aspects of your plan. A gain of 10% per month adds up to 120% per year,
Brandon
