Summary - 1 contract you'll lose due to fees, 15 contracts doesn't compare well with a fast food position and takes months to cover startup costs, 150 contracts will need around $600k risk capital and will not compare favourably with other ways of earning an income when time and risk is considered. Forget outside money as that will affect your clearing costs, your plan is not scalable, and its doubtful if you can do it without a significant risk of blowing up.
Trading 3x per day to make that 1 increment profit is going to leave you negative after transaction costs at the level of one contract. You're talking about averaging 0.3 ticks per trade. Without an exchange membership and appropriate clearing costs this isn't viable.
If you're running a single strategy on a single contract where liquidity is limited to say 150 lots per trade, and you average 0.3 ticks per trade, this isn't scalable to the point where you will be making anything worthwhile after fees.
Lets say you fund an account with $600k, trade 150 lots, average 1 tick per day, average 3 trades per day, and trade 240 days per year. Your annual gross profits will be $450k. Out of your profits, you must pay to clear 216,000 contract sides.
You are grossing $37,500 per month and paying to clear 18,000 sides / month: gross profit $2.08/side.
Variable costs:
Commissions: 20 cents avg over 18,000 sides (c.f.
http://www.advantagefutures.com/open-an-account/commissions/)
Exchange fees: 60 cents as an ECM-W , 46 as a IOM lessee (
http://www.cmegroup.com/company/files/CME_Fee_Schedule.pdf)
Fixed costs:
$500 / month for execution platform
$85 for CME data
Net is 18,000 sides * $1.28 a side less fixed costs = $22,455 / month = $269,450 / year.
If half of this goes for taxes, you're looking at $135k annual return on $600k.
Assuming manual discretionary trading on one instrument, you've hit capacity constraints already. It is going to take you a minimum of a year to devise and test a method for successful intraday trading of ES to gross 1 increment/day, and you will need $600k.
If you live in the west and are halfway intelligent, there are other things you can do to keep $135k/year which don't require $600k buy in, are more scalable, and can perhaps be done with less risk.
There are ways to trade for one increment with low risk, but you don't have the infrastructure and costs to compete with the very smart people in the low latency trading business. Ergo your manual trading of 1 product taking directional risk in size to gross 0.3/tick/trade or 1 tick/day is a very poor proposition even if you succeeded!
Achieving your goal would constitute neither a triple digit ROI or wildly successful by the standards of the financial industry. It isn't even enough for a family to live comfortably in Chicago, New York, or London. For many people it would be an unsatisfactory outcome financially for the work required to get to that point. And how do you value the 12-18 months of unpaid full time work required to achieve your goal?
If you cannot afford to carry 150 lots its even more of a dead duck. At $60k investment and 15 lots your commission cost per side would triple. You'd be seeing $0.88/side on your 1800 sides with $585 monthly fixed costs. $999/month before tax. You'd work a quarter just to cover the $2,000 application fee to CME. And without member rates it definitely doesn't work.
If you aspire to be rational, you should understand the economics of what you seek to do before you do it.
It is quite possible that some of my assumptions or the data I rely on are incorrect. It is also possible that you have set off without a proper plan. Discuss.
Final observation: there are other reasons why you are overwhelmingly unlikely to succeed, but this is the only one I can
prove. If you're open minded, honest, and humble enough I may tell you the others. Frankly people who need help just working out the costs, and who have started down a path based on uncritical acceptance of the claims in an Internet posting are most unlikely to emerge as successful competitors.
