The Dangers of Leverage

Great input...

With all the leverage in futures, will prop trading bring that more to at least derivatives? Stocks maybe, but who can't trade their same strategies on derivatives? A single ES car has so much leverage nobody would dare use it all. Why add more?

It seems like the training for newer guys and (more important) the community is really what ticks, no pun intended.

Correct me if I'm wrong...:P:)
 
Quote from EvOTraderV2:

those are impressive figures. what type of volume are these traders doing? are their strategies similar or completely different in nature?
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That's the good part, several strategies, and combinations there of. The top trader is our volume leader, or very close, each month. Keeps his costs low, and is obviously working well. One guy for sure takes $$ out every month, day trades only, and is very, very consistent.

I think the "sharing" part of the firm's dynamics helps in this regard. As mentioned several of these people speak at our Retreats. Some even share each morning, pre-market. Say what you will, but real interaction is a definite plus in my book.


Don
 
Quote from tenthousandmen:

Great input...

With all the leverage in futures, will prop trading bring that more to at least derivatives? Stocks maybe, but who can't trade their same strategies on derivatives? A single ES car has so much leverage nobody would dare use it all. Why add more?

It seems like the training for newer guys and (more important) the community is really what ticks, no pun intended.

Correct me if I'm wrong...:P:)
More...

There is no need to go prop to be a directional futures trader. We have discussed that at length on here.
 
Quote from EvOTraderV2:

I'm not the one confused, bill. You seem to be. there are MANY n00b traders who call up firms and ask for 20:1 or 30:1 to intraday unhedged positions. It's especially been a topic on other threads where traders with $2500 or $5000 deposits want to intraday trade.

20:1 has been dubbed as "typical" which is completely incorrect for directional intraday trading.
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You equated instrument leverage with position leverage. As a result, you have no idea what are you talking about. Probably you have never traded beyond simulation.

Yes, you can daytrade with $5000. It is because you have never done it that you do not know how it is done. You can even keep leverage and risk very low with $5000 and even make money consistently. It is only because you do not know how that you spew crap and along the way you attempt to convey your misunderstandings to other people. Trading is not for you.
 
I did not say it is impossible to keep your risks proportioned using leverage. I was indicating the danger in excessive leverage for traders with small accounts that certainly exists. I've seen quite a few traders equate leverage with potential profits without assessing the risk involved for their account especially in the case of taking one side of the market without any hedge.

Since you're so convinced I can't trade, you must be willing to put up $$ to bet your PnL statements are better. How about a buy in so other members can get in on it?

Quote from intradaybill:

Yes, you can daytrade with $5000. It is because you have never done it that you do not know how it is done. You can even keep leverage and risk very low with $5000 and even make money consistently. It is only because you do not know how that you spew crap and along the way you attempt to convey your misunderstandings to other people. Trading is not for you.
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:) :
 
In blackjack, we never bet more than 1% of our bankroll. However, we can't win unless we can bet in multiples, called betting ratio. When we see that we have an edge, a high count, then we go from, perhaps 2 units, to maybe 10 units. A bet ratio of 5 to one at that point. We go down to maybe 1 unit (half unit, less than the "off the top of the deck" (relatively neutral bet) however you want to look at it.

To keep it simple, and since I can't play on a table lower then $25 minimum, I simply bet $50 off the top. Plus count, will go to $100 - $250, keeping in mind that I can't just go straight 5 to one (ten to one would be a "side bet" in this case, I would bet two hands, must have highly favorable conditions) (depends on which game, double deck (preferred), or shoe (slightly different game, longer run of plus and minus counts) (note: if you get a negative count early in shoe, just head to the rest room, better to bet zero, without getting busted as a counter by betting one unit).

Ok, where was I going with this, LOL. Oh yeah. If my max bet is around $250, then you should have a bankroll of $25,000. Some think they can get by with 100 times the minimum bet, and we "can" at times....only buy in with $2500. I would worry about betting $250 if that $2500 was all I had to play with. Even with an "advantaged player" edge, we understand that we have standard deviation moves at times.

Does this parallel make sense to you guys?

If you care, you might like this read, from long ago:

http://www.blackjackforumonline.com/content/Brightint.htm


All the best,
Don
 
Quote from Don Bright:

In blackjack, we never bet more than 1% of our bankroll. However, we can't win unless we can bet in multiples, called betting ratio. When we see that we have an edge, a high count, then we go from, perhaps 2 units, to maybe 10 units. A bet ratio of 5 to one at that point. We go down to maybe 1 unit (half unit, less than the "off the top of the deck" (relatively neutral bet) however you want to look at it.

To keep it simple, and since I can't play on a table lower then $25 minimum, I simply bet $50 off the top. Plus count, will go to $100 - $250, keeping in mind that I can't just go straight 5 to one (ten to one would be a "side bet" in this case, I would bet two hands, must have highly favorable conditions) (depends on which game, double deck (preferred), or shoe (slightly different game, longer run of plus and minus counts) (note: if you get a negative count early in shoe, just head to the rest room, better to bet zero, without getting busted as a counter by betting one unit).

Ok, where was I going with this, LOL. Oh yeah. If my max bet is around $250, then you should have a bankroll of $25,000. Some think they can get by with 100 times the minimum bet, and we "can" at times....only buy in with $2500. I would worry about betting $250 if that $2500 was all I had to play with. Even with an "advantaged player" edge, we understand that we have standard deviation moves at times.

Does this parallel make sense to you guys?

If you care, you might like this read, from long ago:

http://www.blackjackforumonline.com/content/Brightint.htm


All the best,
Don
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Don, you can't do this shit anymore. Dealers don't play through the whole deck. They often only deal half the shoe.
 
Well...yes...but if I am on a plus count and playing proper blackjack, I still will increase my size (and sit to the left of the dealer)...

ES

Books to read:
Worlds Greatest Blackjack Book Lance Humble PH.D, Carl Cooper PH.D.

and my favorite:
Playing BlackJack as a Business Lawrence Revere


Quote from Maverick74:

Don, you can't do this shit anymore. Dealers don't play through the whole deck. They often only deal half the shoe.
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Quote from ElectricSavant:

Well...yes...but if I am on a plus count and playing proper blackjack, I still will increase my size...

ES
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Your plus count is meaningless at the front of the shoe.
 
At least I have better than a 50/50 chance when using the plus count when playing proper blackjack no matter where I am at...


Quote from Maverick74:

Your plus count is meaningless at the front of the shoe.
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