After a pause of reflection and some developments of our trading application, it's finally time to resume our trading tests and illustrations.
As you know, I always come back to ET for these illustrations, as this is my preferred site, and lately it has also undergone significant functional improvements which make it even more attractive.
In this thread, I will be carrying another illustration, which can be useful also to those who don't know our previous development work, that is it will be self contained, and starting from scratch.
Before starting, I will also make a brief summary of what we have learnt so far, or at least what we can infer from our previous experiences.
In previous threads we have shown, in full transparency, both moments of relative success and also excruciating defeats (in the last thread we have shown how to bust an entire account) and errors, and those can certainly be useful as lesson to try avoid them in the future.
Looking in retrospect, the greatest problems have often been caused by excessive sizes, relative to the available resources. That is, the situation where there is a disproportion between the available funds and the positions.
This disproportion appears to have 2 main causes:
- the positions actually are relatively "too large"
- the instruments have too large margin requirements
Now for the first problem, we need more capital and/or we need to take smaller positions.
Obviously, the problem is that with some instruments such as futures, there is an inferior limit to the nominal value of the position which often is already quite large. On the other hand, while with ETFs you can go small as you like, there is instead a problem of margin requirements (and also larger trading expenses).
So, in brief (as to margin requirements), we have:
Futures (and their options):
pro: less margin requirements
con: large minimum nominal size: therefore possibility of relatively large DD
ETFs:
pro: possibility to trade smaller amounts (but with larger trading expenses)
con: larger margin requirements (even with "Portfolio Margin")
(other instruments, such as STKs and CFDs, are not even worth considering in our approach, as we have experienced in the previous tests)
However, in our previous experiments, we have also seen that the ETFs may present a lot of more critical problems, which if useful I may recall in a next post, so, personally, I'd suggest to make a marginal, or no use at all, of these instruments.
Given, this (personal) conviction, we essentially remain with futures and their options. A consequence of that is that in order to be able to trade we need a "decent capital", or else we will be easily finishing up our resources and be forced to take losses, in an imploding spiral (with increasing and inexorable trading expenses) which soon becomes irreversible.
What is "decent capital"? Clearly, after a certain minimum absolute capital threshold, the question is rather the proportion between the position and the available resources.
We will start in this thread with an account with 1.5M. But we will be using only a portion of this amount, so when we need to evaluate our performance in relative terms, we will rather look at the max margin usage. Here is the values coming from the account and queried through the API:
As you know, I always come back to ET for these illustrations, as this is my preferred site, and lately it has also undergone significant functional improvements which make it even more attractive.
In this thread, I will be carrying another illustration, which can be useful also to those who don't know our previous development work, that is it will be self contained, and starting from scratch.
Before starting, I will also make a brief summary of what we have learnt so far, or at least what we can infer from our previous experiences.
In previous threads we have shown, in full transparency, both moments of relative success and also excruciating defeats (in the last thread we have shown how to bust an entire account) and errors, and those can certainly be useful as lesson to try avoid them in the future.
Looking in retrospect, the greatest problems have often been caused by excessive sizes, relative to the available resources. That is, the situation where there is a disproportion between the available funds and the positions.
This disproportion appears to have 2 main causes:
- the positions actually are relatively "too large"
- the instruments have too large margin requirements
Now for the first problem, we need more capital and/or we need to take smaller positions.
Obviously, the problem is that with some instruments such as futures, there is an inferior limit to the nominal value of the position which often is already quite large. On the other hand, while with ETFs you can go small as you like, there is instead a problem of margin requirements (and also larger trading expenses).
So, in brief (as to margin requirements), we have:
Futures (and their options):
pro: less margin requirements
con: large minimum nominal size: therefore possibility of relatively large DD
ETFs:
pro: possibility to trade smaller amounts (but with larger trading expenses)
con: larger margin requirements (even with "Portfolio Margin")
(other instruments, such as STKs and CFDs, are not even worth considering in our approach, as we have experienced in the previous tests)
However, in our previous experiments, we have also seen that the ETFs may present a lot of more critical problems, which if useful I may recall in a next post, so, personally, I'd suggest to make a marginal, or no use at all, of these instruments.
Given, this (personal) conviction, we essentially remain with futures and their options. A consequence of that is that in order to be able to trade we need a "decent capital", or else we will be easily finishing up our resources and be forced to take losses, in an imploding spiral (with increasing and inexorable trading expenses) which soon becomes irreversible.
What is "decent capital"? Clearly, after a certain minimum absolute capital threshold, the question is rather the proportion between the position and the available resources.
We will start in this thread with an account with 1.5M. But we will be using only a portion of this amount, so when we need to evaluate our performance in relative terms, we will rather look at the max margin usage. Here is the values coming from the account and queried through the API:
Code:
- Current values (received on: Tue 08 Sep 2015 12:08:40:905 [ Tue 08 Sep 2015 06:08:40:905 edt ]) -
AccruedCash 0.00 USD
AccruedDividend 0.00 USD
BuyingPower 10,167,799.80 USD
FullAvailableFunds 1,525,169.97 USD
FullExcessLiquidity 1,525,169.97 USD
FullInitMarginReq 0.00 USD
FullMaintMarginReq 0.00 USD
NetLiquidation 1,525,169.97 USD
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