Spydertrader's Jack Hershey Futures Trading Journal

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Hi Tiki,

Well, it wasn't real money, but that's not what bothered me. My goal is consistency in application of the knowledge to the extraction of profits. When this happens, it exposes the fact that sometimes I have difficulty in finding the right side of the market.

I have made linear progress to date. I am hoping that I approach a plateau soon so that I will have the time to sit and realize what it is I still don't know. These plateaus, in which the student tries ever so hard to progress but realizes diminished returns for the effort, are necessary. I think they allow the brain to play catch-up so that what has been learned can move from the conscious to the unconscious.

I and many others here will continue to be students of this method for years to come. On the surface it appears that the mechanics are simple and application of those mechanics to the extraction of profits should likewise be straightforward. How I was humbled by this misguided thinking.

I have merely primed and sanded the canvas, and prepared the pencil sketch. The first layers remain to be painted, and each layer must dry before a new layer is started (if you have done oil painting you'll know that it takes several weeks for the paint to fully dry, analogous to the plateaus I was mentioning). Each layer adds further detail, shading, texture, breathing additional life to the artwork.

I can't even trade the forest level profitably, each and every single day, yet. Much practice and experience lies ahead to migrate on to trees, branches, leaves, bugs, etc. The journey, while difficult, remains enjoyable and compelling.

I'm off to play with my labrador retriever now :).

RT
 
Quote from TIKITRADER:

I am sorry to hear you had a bad start.
Just throwing #'s around, to get a loss that you have described, in one scenario, you could of possibly traded around 20 ES contracts and let it go against you for 25 ticks.

That would be a large position to hold for that many ticks.


You were very honest to come on here and share that, so feedback will be here to keep you from doing that again.
You have posted some very good charts.
Your post cannot be ignored. This group has worked together as a team for a year now, and it does not matter when you came aboard.

Slow down here, there is no rush.

It may take another year , or maybe more to solidify what we have learned.
There is a lot here to sink in and that is going to take a while.
Do you ever remember walking out of a class and the professor just had your head spinning ? Then you let some time pass, and one day it just clicks.

Time, that is all that is needed.
Let it sink in, and one day it will click.
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By the way, I have been doing some liquidity experiments with ES lately on the simulator.

NinjaTrader allows you to enforce realistic fills, meaning in order for the fill to complete, you must be in the queue at the position in which the other side of the market can absorb your size.

I have seen 400 and 500 contracts easily filled (almost instantly) in the morning and afternoon, while anything under 50 to 100 can be absorbed during the doldrums.

I have been thinking about the necessity of trading at the tree / leaf / bug level, given the liquidity of the ES. Instead of trading 25 contracts or less at these resolutions, why not trade the forest with 500 contracts (assuming margin requirements are met)? Another trader told me he made the bulk of his money over the years by swing trading, not trying to eek money out of every nook and cranny. This made sense to me, and the forest level, while slow and boring, would yield unthinkable profits with this kind of position size.

What you guys think?

RT
 
I think it would be infinitely easier to do the large size on forest level (in theory). Trading without stops or having a trade go against you with 500 cars on the line would be a bit unsettling I believe :D

On the other hand, I assume that if you can trade the forest level profitably and consistently, the finer resolutions would come quite easily as well.
 
It is possible to "create" liquidity by moving to a longer time frame as can be seen by looking at cnms2's post of today's 15 min ES. However, frequently, though not always, there is a concomitant increase in volatility, which can give rise to some rather nasty stains in one's "captain's" chair.

At last measure, 500 contracts requires an initial margin of $875,000 with each tick against you being $6,250. Yoiks! To trade this sort of load requires cajones d'acero or lots of OPM.

lj
 
Quote from ljyoung:

It is possible to "create" liquidity by moving to a longer time frame as can be seen by looking at cnms2's post of today's 15 min ES. However, frequently, though not always, there is a concomitant increase in volatility, which can give rise to some rather nasty stains in one's "captain's" chair.

At last measure, 500 contracts requires an initial margin of $875,000 with each tick against you being $6,250. Yoiks! To trade this sort of load requires cajones d'acero or lots of OPM.

lj
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Not that it really means anything, but you can hear the goldman, mann, and morgan guys in the big SP contract pit partial in for a total of 1000 contracts once in a while for a day-trade. That's the equivalent of 4000 ES contracts :)

RT
 
Impatience ... I don't see anything wrong with trading hundreds of contracts when you trade them with money you've already made starting from one contract ... If compounding brings you to that margin capability, it means that you can already trust both the method and your skills.

Start with $5,000.
Trade 1 contract until you make $5,000.
Then trade 2 contracts until you make another $5,000.
Then trade 3 contracts ...

There's no need to rush and risk blowing up ... You'll get to 10 and 20 contracts in no time, if you can do it.
 
Quote from cnms2:

Impatience ... I don't see anything wrong with trading hundreds of contracts when you trade them with money you've already made starting from one contract ... If compounding brings you to that margin capability, it means that you can already trust both the method and your skills.

Start with $5,000.
Trade 1 contract until you make $5,000.
Then trade 2 contracts until you make another $5,000.
Then trade 3 contracts ...

There's no need to rush and risk blowing up ... You'll get to 10 and 20 contracts in no time, if you can do it.
More...

I prefer fixed ratio MM. Meaning, each contract must do an equal amount of work before adding an additional contract.

Start with one contract, make $5000. The trade two contracts, make $5000 for each contract, total profit = $15,000. Then trade 3 contracts, make $5000 for each contract, total profit = $30,000. and so on and so on.

The MM you described is a variation of fixed-fractional, which IMO leads to very large drawdowns.

But in this case, if you know what you're doing, drawdowns don't exist. So theoretically, the most efficient growth rate is to trade exactly the number of contracts such that the total margin deposit drains your entire equity. (But of course, that would also require zero MAE for each trade).

RT
 
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