Risk $1000 to make Millions

[TraderZones]

Quote from VoodooMMI:

You are correct that the
ES needs to move up 300 points without a 20 point retracement to make $17 million. But even a 120 point move results in a $13,000 profit. I'm trying to "cut my losses short and let my winners run" I think a system in this vein would achieve that goal. Attached is an Excel file of this simple system.

Having watched people try things like this time and time again, they invariably blow up. But each one thinks they found the magic formula...

 

[VoodooMMI]

Quote from MGJ:

How does it test out in simulation?

Oh yes, one more note: don't forget about gaps. The market can gap right past your stop and give you an unhappy fill. You can lose much more than your planned "risk per trade" because stops aren't always filled at your stated price. Darn it.

I have not back tested this system yet. I do not have any backtesting software other than Microsoft Excel.

You're point about gaps is very well taken. Since the ES hours are Mon/Thurs 5:00 p.m.-3:15 p.m. & 3:30 p.m.-4:30 p.m.; Shutdown period from 4:30 p.m. to 5:00 p.m. nightly; Sun & Hol 5:00 p.m.-3:15 p.m., you need to have a plan to deal with the time the markets are closed and then gap up or down when they reopen.

 

[VoodooMMI]

Quote from TraderZones:

Having watched people try things like this time and time again, they invariably blow up. But each one thinks they found the magic formula...

I don't think this is a magic formula. But if you start with a small position, there are only two ways to add to your position: 1) average down (a la Jérôme Kerviel of Société Générale) or 2) average up. Averaging up takes less capital and it's probably rare that you would get a big position. If you think averaging up is the way to go, then the next question becomes what strategy do you use to average up. Do you add to your initial positions? If so, how?

 

[maxpi]

I was averaging down as price fell and setting a bigger profit target for each new tier. It makes it's gains on the reversion move, the bigger the initial move the bigger the reverting move. I won't get back to testing that anytime soon, it is a toy really because it is absolutely certain to blow out the account at some point and you never how often that is going to happen.

 

[wave]

Add in a column showing margin requirements and % loss of capital if stopped out at the 20pts.

Your equity must be above the maintenance margin requirements.

 

[wave]

There are other position sizing algorithms to achieve the same final dollar amount with a fraction of the position size.

 

[eveningtrader]

Why risk $1000 to make millions, when you can do it with $1. Try mega millions or the power ball.

 

[VoodooMMI]

Quote from wave:

Add in a column showing margin requirements and % loss of capital if stopped out at the 20pts.

Your equity must be above the maintenance margin requirements.

Your point about margin requirements is well taken. Even with futures, you do need some money to trade with.

I'm not sure if this is clear, but the only levels that have a loss are the first 3 levels with $1,000 loss each. At the 4th level you break even. At the 5th and above level, when you get stopped out of the position you make a profit. So the % loss of capital would only apply to the first 3 levels and be dependent on the amount of money in the account.

 

[VoodooMMI]

Quote from wave:

There are other position sizing algorithms to achieve the same final dollar amount with a fraction of the position size.

Which one(s) do you think work the best? Please share an example with us.

 

[VoodooMMI]

Quote from eveningtrader:

Why risk $1000 to make millions, when you can do it with $1. Try mega millions or the power ball.

I've already got my ticket for the Saturday PowerBall drawing but in case I don't win that I thought I should look for a plan B. Call me an optimist but I hope to find a system with better odds than PowerBall.