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Points and Percentages
- Thread starter NeoRio1
- Start date
Quote from osorico:
So let me get this straight...
Account "A" with total equity of 20K takes an intraday ES trade for 20 ticks NET profit, x 10 contracts, with $500 intraday margin required per contract, for a total of $2500 profit, or 12.5% of total equity.
Account "B" with total equity of 5K takes an intraday ES trade for 20 ticks NET profit, x 1 contract, with $500 intraday margin required, for a total of $250 profit, or 5% of total equity.
20 ticks net profit (the number of contracts isn't even important) is the measure, not the size of the account, or profit amount. If you want to learn about money management of the individual traders, the initial stop and trade maintenance stop adjustment, if any, is the measure.
Yes you are right, trader A made 12.5% and trader B made 5%.
The last part of your post makes less sense because money management includes taking into considiration your total equity.
When your total equity is 5K it it is madness to trade futures in the first place.
Quote from Rimping:
The last part of your post makes less sense because money management includes taking into considiration your total equity.
When your total equity is 5K it it is madness to trade futures in the first place.
1) Account management is not the same as trade management. Both techniques, in combo or individually, are valid for risk (aka money) management. In futures, trade management is much more important, IMO, solely due to every trade, by inherent nature of the instrument, being leveraged.
2) This is YOUR OPINION about HOW TO TRADE and has absolutely no relevance to the topic of this thread.
Osorico
Quote from Rimping:
When your total equity is 5K it it is madness to trade futures in the first place.
Not at all. It all depends on your stop size as a percentage of your bankroll. If your stop per trade is something like $100 or 2% and you have a system that is robust enough then you can make money with a risk/reward ratio equal to 2 and a win rate of about 60%.
Try bond or currency futures for a start.
I used cash. Money talks.
Quote from Rimping:
When your total equity is 5K it it is madness to trade futures in the first place.
Disagree. I began trading two contracts of eminis with $1,500 and would do it again tomorrow. I scalp seconds to minutes, do not hold long and never go overnight, so drawdowns are not an issue. I use hard stops and hard profit limits. I am glad I started with a broker who imposed overnight margin on intraday futures, so I could learn with a large safety net. However, after one has a system proven and money management well in hand, there is no reason not to leverage your account to the intraday maximum. I now use a $300 margin on eminis and have yet to see a margin call. It's been 8 years. The warnings against low margins are for beginners only.
Quote from osorico:
This is YOUR OPINION about HOW TO TRADE and has absolutely no relevance to the topic of this thread.
Osorico [/B]
It has relevance to the topic: The starter of this topic also wonders why people mention their point results because only when you use percentage you can see how well somebody is trading.
I would go further: the result of any individual trade doesn't matter at all. What matters is how much money you made in let's say six months. And then put that as a percentage of your total equity. That says something about your performance as a trader.
Quote from GermanTrader:
Disagree. I began trading two contracts of eminis with $1,500 and would do it again tomorrow. I scalp seconds to minutes, do not hold long and never go overnight, so drawdowns are not an issue. I use hard stops and hard profit limits. I am glad I started with a broker who imposed overnight margin on intraday futures, so I could learn with a large safety net. However, after one has a system proven and money management well in hand, there is no reason not to leverage your account to the intraday maximum. I now use a $300 margin on eminis and have yet to see a margin call. It's been 8 years. The warnings against low margins are for beginners only.
In 99.9% of the cases people will go broke in that way.
Quote from Rimping:
It has relevance to the topic: The starter of this topic also wonders why people mention their point results because only when you use percentage you can see how well somebody is trading.
I would go further: the result of any individual trade doesn't matter at all. What matters is how much money you made in let's say six months. And then put that as a percentage of your total equity. That says something about your performance as a trader.
So is that total equity with or without withdraws? You are a conservative, perhaps an "old dog" trader and there is nothing wrong with that. But quite frankly, you wouldn't be able to comprehend the return on total equity of more aggressive types like myself.
And don't go off on some unlimited compounding rant. Unlimited compounding works on paper, it does not work in reality... returns on total equity of "small-timers" like me are consistently outside of conservative comprehension. Returns of billion dollar funds can't compete because they can not be nimble enough.
Good, consistent, trading to you
Osorico