The Truth about Daytrading Futures..

[Trend Fader]

Quote from TGregg:



This has bothered me for a bit. Not that I plan to get rich, but I do expect to grow an income and a few years after I am a successful trader (as defined in Nihaba's post) I expect to reach a six digit income.

If I am not a successful trader, I expect a six figure income as a 7-11 stickup artist.

Seriously though, take for example a professional trader that I just made up. He makes about half a point/contract/trade net (give or take). He makes about three or four trades a day, say 2 points a day or about 500 points/contract/year. He trades about 3 contracts per trade, and probably makes about 70k/year (right in line with your estimate).

He's been earning a living by trading for more than 5 years. In other words, he's pretty much the traders you refer to above.

Now, why doesn't he slowly scale up? We're not talking trading 3 contracts on Monday, and 300 on Tuesday. We're talkin' one more. If he made $300 on a 3 contract ES trade, he surely could have made $600 if he had made the same trade on 6. Yeah, there are psychological issues, and (as somebody very respected once said to me) "You gotta earn size", but can't one scale up?

And if not, why not? And if so, why are they only making 65k? We're not talking obscene amounts of wealth here.

Because the whole thing is a crock. There is no such thing as average trading salaries.

No one averages 2 points a day... or makes X amount a money a week consistently for years.

Trading should not be considered a job or business.. its a gambling sport. Some weeks you can make a killing and others you can wipe out months profit.

In reality anything that involves taking calculated risk.. even with a positive expectancy.. will deviate from the mean.. and can wipe a trader out or make him into a millionaire.

If a trader starts out trading 1 contract and averages 1 point a day.. for 6 months... the day he starts trading with 2 contracts he can go through a draw down a lose 1 point a day the next few weeks and put him back to where he started.. thats reality. Thats why no one really has the balls to scale up so aggressively.. unless they have balls to the wall and are willing to accept blowing up as a possibility.

--MIKE

 

[dbphoenix]

Quote from Trend Fader:

Trading should not be considered a job or business.. its a gambling sport. Some weeks you can make a killing and others you can wipe out months profit.

In reality anything that involves taking calculated risk.. even with a positive expectancy.. will deviate from the mean.. and can wipe a trader out or make him into a millionaire.

If a trader starts out trading 1 contract and averages 1 point a day.. for 6 months... the day he starts trading with 2 contracts he can go through a draw down a lose 1 point a day the next few weeks and put him back to where he started.. thats reality.

If you believe all of this, I'm surprised you make any money.

 

[Trend Fader]

The biggest mistake newbies make.. is apply rational business model approach to trading...

Here is what I see happen on ET all the time. Some newbie starts a journal with $5k and says well.. I am trying to scalp 2 points a day.. that should make me around $100 a day.. so that could be $500 a week.. or $2k a month which will get me by for a year.. then I will just scale up and in 3-4 years I can be realistically making $100k a year.

In reality they start trading and there $5k account becomes $3k in 2 months.. and then they stop posting on ET.

You have to accept trading for what it really is. Its educated gambling and is extremely difficult to make consistent money every month let alone every week.

Most casinos have there profit distribution completely random daily, weekly, monthly... but yearly they are consistently profitable. Thats what trading is all about and thats why its so difficult.


--MIKE

 

[illiquid]

Just because someone's avg is .5pts/trade doesn't mean he or she is making a consistent .5 on every trade; more likely it's a wide range of days, with extremes of +8pt gains all the way to blowouts of -10 or more (esp considering commissions). Now throw in the tendency for traders to push harder while losing, and becoming more timid while sitting on gains -- well, it's just not so simple to translate a doubling of position size into a doubling of profits.

Taken a step further, I really don't think there is such thing as someone who is consistently profitable for .5pt/trade for the long run, or at least they are much rarer than some ppl on these boards would have you believe. Whenever you take a group where 90+% fail while less than 1% are taking the large majority of the gains, the term "average profitable trader" can be very misleading. If one has a true edge in this game, they will be making alot more than 60-70k, it's just the nature of the business.

Someone who is getting by with .5pt/trade with multiple trades/day is more likely either on the road to making much more than that, or just biding time before the market finally catches up with them. JMO. . .

 

[Trend Fader]

Quote from dbphoenix:



If you believe all of this, I'm surprised you make any money.

I actually am net profitable yearly... but daily and weekly.. my profit distribution is completely random.

I dont have any expectations of how much $ i will make.. and I dont rationalize my trading as working for an invesment bank in wall street (which I used to).

I accept the fact that at the end of each trading year I can make a lot of $.. or realistically lose my starting capital. I do not believe that I will make money for sure.. or that I am prone to make X amount of $.. because thats what my tradestation results are indicating.

The reality is.. working for an investment bank I know exactly how much $ I should be making next year with a very high chance of actually making it (assuming my bank does not fire me or go under)... and further.. how much $ I can earn a year or 2 from now... If anyone applies this type of business logic to trading.. they are fooling themselves.

--MIKE

 

[Trend Fader]

Quote from illiquid:

Just because someone's avg is .5pts/trade doesn't mean he or she is making a consistent .5 on every trade; more likely it's a wide range of days, with extremes of +8pt gains all the way to blowouts of -10 or more (esp considering commissions). Now throw in the tendency for traders to push harder while losing, and becoming more timid while sitting on gains -- well, it's just not so simple to translate a doubling of position size into a doubling of profits.

Taken a step further, I really don't think there is such thing as someone who is consistently profitable for .5pt/trade for the long run, or at least they are much rarer than some ppl on these boards would have you believe. Whenever you take a group where 90+% fail while less than 1% are taking the large majority of the gains, the term "average profitable trader" can be very misleading. If one has a true edge in this game, they will be making alot more than 60-70k, it's just the nature of the business.

Someone who is getting by with .5pt/trade with multiple trades/day is more likely either on the road to making much more than that, or just biding time before the market finally catches up with them. JMO. . .

I agree.. excellent post.

 

[TGregg]

Quote from bdixon619:

I can't speak for anyone but me. . . Respect. Maybe these guys all have respect for their source of income and like a good horse they don't want to work it to death.

Thanks for your reply, BDixon. I hope you realize that I am not trying to be flippant or anything - but I still don't understand. Maybe it's because I am too hungry, or maybe because I am not yet supporting myself by trading, but I don't see it as more work for the horse, so to speak. It seems to me that trading more contracts is more like getting paid twice as much for the horse's work.

 

[illiquid]

Trend Fader, I think there are traders who have extraordinary edges in intraday eminis, the only thing is if they actually posted their results here, no one would believe them. And since they'd most likely not be crazy enough to reveal exactly what their edge is on a public message board -- well, it's likely that you won't find evidence here to change your belief that they don't exist.

 

[Trend Fader]

Quote from illiquid:

Trend Fader, I think there are traders who have extraordinary edges in intraday eminis, the only thing is if they actually posted their results here, no one would believe them. And since they'd most likely not be crazy enough to reveal exactly what their edge is on a public message board -- well, it's likely that you won't find evidence here to change your belief that they don't exist.

Actually.. I believe that there must be a few great emini traders out there that are actually making an nice living...

But I dont believe they consistently can make $ every day or week... for years.

--MIKE

 

[dbphoenix]

Quote from TGregg:

I still don't understand. Maybe it's because I am too hungry, or maybe because I am not yet supporting myself by trading, but I don't see it as more work for the horse, so to speak. It seems to me that trading more contracts is more like getting paid twice as much for the horse's work.

Yes and no. Whether you trade multiple contracts successfully depends on the foundation you have laid.

For example, if you haven't fully accepted the risks inherent in trading one contract, trading two or more isn't going to make that any easier.

If you're unable to execute your system flawlessly, without hesitation, then trading multiple contracts isn't going to make that any easier, either.

If you're unable to generate consistent profits over a series of trades, then trading multiple contracts isn't going to make those profits easier to reach.

But once you have developed a profitable system and have achieved the discipline to execute it flawlessly, and once you have achieved a level of consistency that enables you to profit from your efforts, and once you have achieved a level of objectivity that keeps you faithful to your rules, you still have to come up with some reasoned and logical approach to increasing the number of contracts you're ready to trade.

One of the more common ways of doing so is to add a contract at each continuation entry. This may be a problem until ranges expand. But, if you're a trend-trader and you can withdraw when there is no trend, you ought to be able to make enough on trending days so that you don't have to trade when the market isn't willing to provide you with any opportunities.