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Starting with 1 ES contract...
- Thread starter Blotto
- Start date
Not necessarily. I have an algo running that gives buy and sell signals for the CL but I have slippage programmed into the code. It's a very robust app but far from perfect. The thing with algo trading is you can't develop a black box and expect it to work indefinitely. You have to continuously make modifications and improvements to the program to adapt to changing market conditions.
Quote from eudaemon:
Many traders spend a lot of time (years, decades? ) "creating" a system that at the end of the road will not work with any size worth trading.
For example, many "price action" traders gravitate towards the CL, when it is obvious that their method/system/whatsisname they are developing (most of them very discretionary) will completely break down if they attempt to trade it with as few as 5 contracts, just on stop slippage for example.
Just one of the many issues with getting bigger. Generally it is much easier getting in than getting out, and nobody likes to talk about getting out. Getting in?. Sure: Sell 2,000 ES at the market, you'll get a fill within 3-4 ticks in RTH. Now try getting out of that, without losing an eye...
I agree. Getting in and out of the CL requires different tactics than say, the ES. If you're trading the QM it's even worse. Getting in and out of a 5 lot on the CL isn't difficult. If you are going long you need to buy on down ticks, which will get you a good, fast fill. I typically exit with limits but I keep the trade out button handy if the market doesn't trade through that limit. Just gotta eat the slippage on a situation like that -- cost of doing business.
Quote from Blotto:
If you're that rotton at execution to have difficulties getting your 5 lot done without getting raped in CL, you really have no business trading.
I'm actually running an experiment much like this. In a year, I'll let you know how far I've gotten. The main difference is that I'm not day-trading, defined as being flat at the end of each RTH session. When I get into a trade, I never know how long I will hold it. I've got a very specific definition of a "trend" and I hold it as long as the "trend" remains in my favor. My average winner is about 7 ES points and the range is from a single tick up to 25 points. An average day is close to 4 points total. Sometimes I hold for a couple of hours, sometimes overnight. Sometimes I get stopped out with a profit and then re-enter because the "trend" resumes. If the ES is trading, I'm watching for trades. One of the main problems I will face as my size gets larger is that I sometimes will have a position, long or short, and a trade in the other direction will trigger and in my strategy that does not call for an exit of the pre-existing position, but an adding of a position in the opposite direction. In the ES, this means buying the non-active contract, which means terrible liquidity, especially overnight. That could end up being a limiting factor. That said, with a 7 point average winner, I can afford to give up a few ticks in order to size my position to what I want. This doesn't happen that often, though.
Agree that it is not for a new trader. That said, when you start with a small number of contracts, you are quickly either bust or playing with house money. Real money, of course, but house money. But, you've got to look at it as a marathon, not a sprint. You can't say "I'm going to add X number of contracts a day/week/month/whatever", you have to take what the market gives you. And, you have to understand the "why?" of your strategy, so that when a drawdown happens, you don't panic. I have a metaphysical certitude in my strategy, even though, like all strategies, it is subject to probabilities and the reason is because for each decision node within my strategy I understand EXACTLY why the decision I will be making is the optimal decision to make with the information available at the time of the decision. I'm at the point where breaking a rule is more frightening to me than losing money on a given trade. You know how they say you should trade as if you were being paid on how well you follow your rules, rather than your trade results? That's me.
Also, fortunately, I have other income that is quite sufficient for me to live on, so I can try this with very little overall lifestyle risk.
Agree that it is not for a new trader. That said, when you start with a small number of contracts, you are quickly either bust or playing with house money. Real money, of course, but house money. But, you've got to look at it as a marathon, not a sprint. You can't say "I'm going to add X number of contracts a day/week/month/whatever", you have to take what the market gives you. And, you have to understand the "why?" of your strategy, so that when a drawdown happens, you don't panic. I have a metaphysical certitude in my strategy, even though, like all strategies, it is subject to probabilities and the reason is because for each decision node within my strategy I understand EXACTLY why the decision I will be making is the optimal decision to make with the information available at the time of the decision. I'm at the point where breaking a rule is more frightening to me than losing money on a given trade. You know how they say you should trade as if you were being paid on how well you follow your rules, rather than your trade results? That's me.
Also, fortunately, I have other income that is quite sufficient for me to live on, so I can try this with very little overall lifestyle risk.
Quote from oldtime:
My 2 cents. At 1300, 6k might be enough for your system. But at ES1600, you might need to widen your stops.
ES800 you might be able to trade same system with less than 6k.
That might seem logical due to "notional value" of the index per contract, but notional value means less than nothing to short-term futures traders.
Range and volatility mean everything to risk management. At 1300 the VIX is teens to 20s and daily range 10ish points. A 1.5 point stop is plenty if your entry is crisp, 2.0 pt more than enough or you need a new trade-entry approach.
At 800, 700 and 600+ ES levels the VIX would be 50s, 60s or 80s and daily range 30pts to 100pts from high to low. Then a 4pt stop might hold inside the half-dozen or so 15pt to 45pt price swings intraday... if the same entry tactic is equally crisp.
how long is a piece of string?
there are so many factors that affect the outcome, its like asking, how long will it take me to be president.
there are so many factors that affect the outcome, its like asking, how long will it take me to be president.