Trading ES/YM -- Multi-day instead of Daytrading

Quote from andysmith:

Anyone trading ES and/or YM on a multi-day timeframe (i.e. not daytrading)? Seems like everyone is a daytrader.....
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I have been tempted but I am too risk averse with respect to large gaps going against me, in my old age...
 
newbunch,

I'm not a day trader and found it curious that most ES/YM traders were daytraders.

I'm asking because I'd like to multi-day trade ES (more likely YM), catch a trend and trail with a volatility-based trailing stop. I'd do this only a handful of times a year, when a trend is evident.
 
Quote from andysmith:

newbunch,

I'm not a day trader and found it curious that most ES/YM traders were daytraders.

I'm asking because I'd like to multi-day trade ES (more likely YM), catch a trend and trail with a volatility-based trailing stop. I'd do this only a handful of times a year, when a trend is evident.
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There's no reason you can't do this. Just because few people do it, doesn't mean it can't be done. I've been long-term trading the ES since March 2003 (and started trading the ZN just this month) and have made very good money doing so. Before that, I traded the SPY, SPX options, and baskets, but ES is the way to go if you want some leverage and/or favorable tax treatment.
 
Newbunch,

Can you share the basics of your approach without giving away your secrets (stop loss placement, average returns, discretionary or mechanical,... whatever you are comfortable sharing)...
 
Quote from andysmith:

Newbunch,

Can you share the basics of your approach without giving away your secrets (stop loss placement, average returns, discretionary or mechanical,... whatever you are comfortable sharing)...
More...
No stops or anything. My system is a weekly fundamental and technical system. It tells me what exposure I should have to the S&P and 10-year bond for the following week and I make the trade at Friday's close (or close to it). Actually, the trading is automated, but that's a different story.

The key when trading futures, which have so much leverage, long term is to limit your exposure. Obviously, you don't want to use the full leverage because you'll get wiped out eventually. I do extensive back testing, have number risk measures, and also assume some worst case scenarios (I'm max long in Oct 87 on the stocks side which, if true, would mean my system really sucks but I still would have some money left).
 
"The key when trading futures, which have so much leverage, long term is to limit your exposure."
-- The dilemma here is that when trding equities it was fine to use ES to hedge portfolio risk. But when trading ES, that option goes away. What are you using for risk mitigation -- protective puts? Cross market hedging?

Thanks for your help, Newbunch.
 
Quote from andysmith:

-- The dilemma here is that when trding equities it was fine to use ES to hedge portfolio risk. But when trading ES, that option goes away. What are you using for risk mitigation -- protective puts? Cross market hedging?

Thanks for your help, Newbunch.
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The greatest hedge of all is to limit risk in the first place. I'm not saying those who use leverage and hedge are wrong. I user leverage, but I keep it within limits.

I like to keep things simple. If I have a system that trades the S&P, I simply trade the ES. No fancy hedges on top of it. Similarly, if you have an arbitrage system, you shouldn't make directional bets. Stick to your strength. People often ask why I only trade one or two instruments. That's because I stick to my strengths. I'd rather trade one thing very well than ten things not as well.

So no protective puts. No cross market hedging, but my stock and bond systems have a 4% correlation, so that allows me to diversify without raising my risk. I make pure directional bets on the market.
 
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