I have a well established set of rules. Because of market volatility, the smallest increment of the YM (1 contract) exceeded, and continues to exceed my risk. I can only control that risk by simply not trading that contract.
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How do you arrive at that conclusion? What method did you use? One thing you are somewhat forced into when trading index futures is a concept called specialization. Since you'd only be trading one or two indicies, you develop systems that are tailored to the index taking into account its unique character and vagaries. That significantly reduces risk. You'll learn what type of stops to use and where they should be placed per setup. Your risk will be well defined and managed. Many futures traders, even some scalpers, use OCO (one cancels other) bracket orders. They predefine their exits and stops.
First, thanks for your insights. I can tell you've been at it for awhile. I'm in 5 years, and 2008 was my first net profitable, and just.
My system is very simple. Stops and targets are based on previous pivots in my selected time frame, and entries are based on TL breaks and retests, hopefully establishing new and higher/lower PP's. Even though the hoped for developing pivot will become my stop, by assuming so at entry often leads to a quick stop out, as I don't always wait for price BO's/BD's to enter, especially in larger time frames. It reduces my size by nature, but gives the play breathing room. I began trading the YM in Oct, as I simply needed to withdraw capital for home repairs.
During the last several months, just 1 contract on a 1 minute time frame of the YM would require up to several hundred dollars of risk. That is beyond my current tolerance. I prefer larger time frames, as well, which put the YM risk well beyond my reach. This is resolved in an etf like the q's by reducing my size from 500 to 300, or 300 to 100 shares. My risk is based on a percentage of my total account size.
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I can control my risk trading stocks and etf's, however, but I am limited by the PDT with my current funding. And here's how. I must trade a larger time frame to avoid triggering the rule too many times. That also means a bigger stop, which translates to smaller size, which translates to smaller profits (and losses of course)... and a lot more sitting around and waiting. I believe the PDT is all about risk, and as most gov actions, SEC or otherwise, misguided and miscalculated.
From my current perspective, it robs me of opportunity...providing I don't change my rules...and we all know what happens when we violate our rules.
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But, your rules need to be changed to compensate for the PDT if you wish to continue trading stocks. It won't be an easy thing, but since the rule isn't going away, it behooves one to adapt.
Exactly what I have done by moving to the 60' and daily frames' off the 5 and 15', but unfortunately less size makes for smaller profits and introduces overnight risk in the etf I trade. A sacrifice.
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What instrument do you recommend for intraday trading, given what I've just described?
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Index futures. E-mini S&P 500 futures. Greatest thing since sliced bread
I love the YM, and will resume when the risk in my favorite time frames comes back to my tolerance...sooner rather than later, I believe. Having said that, I like to scale, which is not really possible without a PDT on my etf plays, and not going to be possible until my account is large enough to trade several contracts at one time. Risk grows commensurate with my account size. Good luck with your trading, too!
