Using broker statements to get a trading job?

from your reply, I am deducing following numbers: # of trades per year 125. PF = (68%/32%)*2.5 = 5.31. If this is true, this is excellent number. I have developed many different strategies and the best PF I have got is 3.

Since you are holding overnight, lets say you can trade 1 contract for every 5000$ (since 4000$ is the overnight maintainance margin). Your average win is 10 points and average loss 4 points with 68% win ratio, so your average points per trade is 6 points which is 300$.

Using fixed fractional compounding, using 5000$ per contract, assuming a starting account balance of 10000$ and an average profit per trade of 300$ will result into 11 million dollars after 125 trades (1year), and you would be trading more than 2000 ES contracts on your last trade. I ran these numbers in my spreadsheet - I am confident of my numbers but I still encourage you to verify my numbers for your own good.

Now, since you will experience both profitable trades of 10 ES points and negative trades of 4 ES points instead of every trade being profitable with 6 ES points, you will experience some drag on your equity. In my experience, this drag will reduce your total equity by a figure of 2. So your year end equity would be 5 million dollars starting from 10k. I encourage you to verify this number also by looking at your backtesting.

In lieu of above numbers, what do you think ? If what you say is correct, isn't the best course of action staring you in your face? Its obvious that given the information you have given me, you should not take a job and just run this strategy as your sole income. And I haven't even included the other markets like Euro etc.

Finally, you are well educated, you can always go back to work after 8 months, if things don't work out as expected. Chances of a deal with any trading firm paying you over 5million is nil.

Interested to hear what you think of above.

Good luck
Quote from logic_man:

In the ES, it gives a valid trade every two days, although some days it will give multiple signals and other times it can go a while in between signals. Since you sometimes have to hold overnight, you need to be able to maintain enough margin per contract to do that. Win percent is about 68% and win/loss ratio is about 2.5 to 1. Average points gained per winning trade is a little over 10. I've just been paper trading the same concept in the Euro for a few weeks, but it appears to have about a similar trade frequency. Sometimes, the ES and Euro trades are concurrent and other times they are not. I'd like to keep adding markets until I am pretty much always in a trade. Again, that assumes that the same strategy will work across markets. The strategy has been backtested for 3 years. It gives both long and short signals, so the results don't simply stem from being long in a bull market.

My opportunity cost is pretty high, which is why I'd like to change careers and work as a trader, rather than do what I have been doing (corporate consulting). I can afford not to work for a couple of years, but if I can actually get a trading job paying me something akin to what I was making in my old line of work, that would be more of an ideal. The problem is that the potential opportunity cost of not seeing if these 8 months of profitability can be extended to eventually become years of profitability is also potentially high. Since I'm trading the ES, there is no reason why this can't scale up to trading hundreds of contracts at a time. My hypothesis is that the main limiting factor to the scalability is that you sometimes need to exit trades overnight and unloading a few hundred contracts without moving price at 3AM Easter time might be an issue, although I have seen blocks over 1000 contracts traded even at that hour. With the current win/loss ratio being so favorable, even a couple of ticks of slippage won't kill it.

I know that trading is all about results, which is why I was curious if anyone had gotten a well-compensated position (I'm talking over 6 figures in base, which actually isn't that much for a successful trader. I don't really want to go into a situation where I am only compensated on results because if I want that, all I have to do is keep trading my own account) by showing the results of their personal trading. I have an MBA from one of the top b-schools, which doesn't hurt, but I wasn't a finance major and I didn't work on Wall Street after school, I was a strategy major and all of my post-MBA work has been in that area. Trading has always been something I did "on the side", but I've finally developed something that clearly works and would like to do it full-time. So, I can either not get a job doing consulting and just trade without any other income coming in or I can get a job trading that pays over $100K base plus a results-based bonus. The problem is that no one will hire me for that second option based only on my resume, but I was wondering if they would hire me based on my results. Of course, there is some element of "You won't know until you try" to the question.
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Another thing - I am guessing you are pretty young and have fallen behind your MBA batchmates in your career path because of your focus on trading for the last few years. So the pressure on you might be immense to at least hedge some part of the risk that the trading gig doesn't work out.

My point is - if every number you have given me is correct - and you have 8 months of proven live trading experience to support that - man, you will be far far ahead of your whole damn MBA class in two years from now.

Just make the damn process completely robotic - use your brother/mother/girlfriend to execute your trading signals, if you yourself can't execute them as the strategy suggests. Just become braindead, and you will be way ahead. One more advice, as you start building up capital, make sure you withdraw a set percentage say 3%-5% every month from your trading account and put it away as a safety net for your future life. In two years, you will have your million dollar house paid in cash when your MBA classmates would be paying their EMIs on their 500k house.
 
Quote from gmst:

from your reply, I am deducing following numbers: # of trades per year 125. PF = (68%/32%)*2.5 = 5.31. If this is true, this is excellent number. I have developed many different strategies and the best PF I have got is 3.

Since you are holding overnight, lets say you can trade 1 contract for every 5000$ (since 4000$ is the overnight maintainance margin). Your average win is 10 points and average loss 4 points with 68% win ratio, so your average points per trade is 6 points which is 300$.

Using fixed fractional compounding, using 5000$ per contract, assuming a starting account balance of 10000$ and an average profit per trade of 300$ will result into 11 million dollars after 125 trades (1year), and you would be trading more than 2000 ES contracts on your last trade. I ran these numbers in my spreadsheet - I am confident of my numbers but I still encourage you to verify my numbers for your own good.

Now, since you will experience both profitable trades of 10 ES points and negative trades of 4 ES points instead of every trade being profitable with 6 ES points, you will experience some drag on your equity. In my experience, this drag will reduce your total equity by a figure of 2. So your year end equity would be 5 million dollars starting from 10k. I encourage you to verify this number also by looking at your backtesting.

In lieu of above numbers, what do you think ? If what you say is correct, isn't the best course of action staring you in your face? Its obvious that given the information you have given me, you should not take a job and just run this strategy as your sole income. And I haven't even included the other markets like Euro etc.

Finally, you are well educated, you can always go back to work after 8 months, if things don't work out as expected. Chances of a deal with any trading firm paying you over 5million is nil.

Interested to hear what you think of above.

Good luck
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Your deductions are very accurate and square up with what I've projected forward and I definitely agree that taking time away from corporate work at this juncture makes a lot of sense. I guess I was looking for a "best of both worlds" situation and while I agree that it's a certainty that no firm would pay me $5 million in base pay, I've been around Wall Street enough to know that $5 million in bonus pay is feasible, although obviously rare. I don't know how much buying power a firm would give me, but given enough, they could make much more than $5 million by deploying the strategy with enough capital to take full advantage.

You are correct that I am trying to hedge some of my risk, at least during the first year or so. I'd probably only want to work for someone else for that amount of time, then "take the money and run" and trade for myself, provided the strategy is still working. Another wild card for me is that the trade frequency has recently declined by 50% (in the ES), which is why I'm looking at other markets. While that is not necessarily a bad thing, because I'd rather be out of the market and flat than having a bunch of losing trades just to feel like I'm doing something, it means that I'm exposed to "trade frequency risk" more than I'd like. Winning percentage is still in line with historical norms, there just aren't as many trades. That can change overnight, of course, but it could also continue.
 
Quote from gmst:

Another thing - I am guessing you are pretty young and have fallen behind your MBA batchmates in your career path because of your focus on trading for the last few years. So the pressure on you might be immense to at least hedge some part of the risk that the trading gig doesn't work out.

My point is - if every number you have given me is correct - and you have 8 months of proven live trading experience to support that - man, you will be far far ahead of your whole damn MBA class in two years from now.

Just make the damn process completely robotic - use your brother/mother/girlfriend to execute your trading signals, if you yourself can't execute them as the strategy suggests. Just become braindead, and you will be way ahead. One more advice, as you start building up capital, make sure you withdraw a set percentage say 3%-5% every month from your trading account and put it away as a safety net for your future life. In two years, you will have your million dollar house paid in cash when your MBA classmates would be paying their EMIs on their 500k house.
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Yes, the trading bug does tend to eat into time that could have been spent doing other things. I still managed 100% billability in my last job, though. I've always hated sleeping, so I tend to work at all hours, which enabled me to both do my job and develop this trading strategy. It helped that I could work from home because almost all of my work was done over the phone with people scattered all over the country.

I've actually only messed up trade management twice this year, out of 26 trades, after making it my resolution to not break any of the rules. Of course, the strategy working as well as it works meant that both of those missed trades were winning trades, only I took a smaller profit than I could have had.
 
Quote from logic_man:

Your deductions are very accurate and square up with what I've projected forward and I definitely agree that taking time away from corporate work at this juncture makes a lot of sense. I guess I was looking for a "best of both worlds" situation and while I agree that it's a certainty that no firm would pay me $5 million in base pay, I've been around Wall Street enough to know that $5 million in bonus pay is feasible, although obviously rare. I don't know how much buying power a firm would give me, but given enough, they could make much more than $5 million by deploying the strategy with enough capital to take full advantage.

You are correct that I am trying to hedge some of my risk, at least during the first year or so. I'd probably only want to work for someone else for that amount of time, then "take the money and run" and trade for myself, provided the strategy is still working. Another wild card for me is that the trade frequency has recently declined by 50% (in the ES), which is why I'm looking at other markets. While that is not necessarily a bad thing, because I'd rather be out of the market and flat than having a bunch of losing trades just to feel like I'm doing something, it means that I'm exposed to "trade frequency risk" more than I'd like. Winning percentage is still in line with historical norms, there just aren't as many trades. That can change overnight, of course, but it could also continue.
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Actually, my current situation is very similar to you :)

Anyways and this is important. Trade frequency getting reduced is a very very positive thing IMO from your long term consistent success in trading point of view. 1.5 years ago, I was in a similar position as you are currently in the sense that I had 1 very good strategy (PF 2.5) with around 30 trades per year. My only worry was less number of trades per year - this worry eventually turned out to be a great motivator for me to work on additional strategies. 1.5 years down the line, not only did I modified that strategy to have around 50 trades per year but also discovered 10 more strategies. Now I have a whole portfolio of strategies. At any time, I can't trade more than 5 or 6 of them - so currently depending on market environment I pick and choose some strategies. Total number of trades in a year for me has gone up from 30 strategy trades to more than 300 strategy trades, which basically means a much faster compounding. So I am hopeful that this problem will force you also to develop many more strategies which will eventually make you equity curve much smoother.

Having said above, I am truly impressed with a PF of 5+. Man, how did you get that and that too on ES? Wow!

Finally, I think there is a lot of merit to the idea of continuing some part time job and raising around 50k from some uncle/friends etc. to shore up your trading account and run the operation for 8-10 months more. Maybe do a 50-50 split - show them the big profits they will be able to make. If after 8-10 months, things are still not working out as your plan, time to go and get a fulltime job. Basically, once you have a 5+ PF strategy with 125 trades a year, it doesn't make sense to go and work for someone else. Also wallstreet won't give you a large amount of margin to start with. Those MDs have huge egos trust me. They will always think of you as a punk. Also MDs with 10yrs experience on WS get paid 5mm, associate and VPs are almost always under 500k total comp. And you said you don't have any WS experience. So its definitely going to be hard for you to break in, even with this strategy.
 
Quote from gmst:

Actually, my current situation is very similar to you :)

Anyways and this is important. Trade frequency getting reduced is a very very positive thing IMO from your long term consistent success in trading point of view. 1.5 years ago, I was in a similar position as you are currently in the sense that I had 1 very good strategy (PF 2.5) with around 30 trades per year. My only worry was less number of trades per year - this worry eventually turned out to be a great motivator for me to work on additional strategies. 1.5 years down the line, not only did I modified that strategy to have around 50 trades per year but also discovered 10 more strategies. Now I have a whole portfolio of strategies. At any time, I can't trade more than 5 or 6 of them - so currently depending on market environment I pick and choose some strategies. Total number of trades in a year for me has gone up from 30 strategy trades to more than 300 strategy trades, which basically means a much faster compounding. So I am hopeful that this problem will force you also to develop many more strategies which will eventually make you equity curve much smoother.

Having said above, I am truly impressed with a PF of 5+. Man, how did you get that and that too on ES? Wow!

Finally, I think there is a lot of merit to the idea of continuing some part time job and raising around 50k from some uncle/friends etc. to shore up your trading account and run the operation for 8-10 months more. Maybe do a 50-50 split - show them the big profits they will be able to make. If after 8-10 months, things are still not working out as your plan, time to go and get a fulltime job. Basically, once you have a 5+ PF strategy with 125 trades a year, it doesn't make sense to go and work for someone else. Also wallstreet won't give you a large amount of margin to start with. Those MDs have huge egos trust me. They will always think of you as a punk. Also MDs with 10yrs experience on WS get paid 5mm, associate and VPs are almost always under 500k total comp. And you said you don't have any WS experience. So its definitely going to be hard for you to break in, even with this strategy.
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Thanks for the info on the Street.

How did I get this strategy? Honestly, I don't know. I think some of it is a result of the fact that I'd tried a lot of things that didn't work, which Livermore said is an important part of a trader's education. Then, I found someone who was doing something which did work. I took that approach and adapted it to make it work even better.

Yes, I could have reacted to the decrease in trade frequency by attempting to develop another strategy, but the strategy I have developed is so all-encompassing that I don't know how to go about developing another one, hence my turn to markets other than the ES. What I do now is as all-encompassing as Elliott Wave, which was the starting off point of what I'm doing, but with more rigor and all of the extraneous mumbo-jumbo removed. I'm pretty sure that there is a strong correlation between the number of trade signals I get and volatility, as measured by the VIX, although I have not quantified it.
 
Quote from logic_man:

Has anyone tried this and succeeded? I've developed an algorithm for the ES and have had 8 months of profitability with a gain of 196% and a max drawdown of 26%.
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On real money or sim ?


What account size and how many contracts per trade ?
 
Quote from volente_00:

On real money or sim ?


What account size and how many contracts per trade ?
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Real money. I have the brokerage statements to prove every claim I've made about the strategy.

Not sure if account size matters, since I'm talking about the ES, not some small cap stock. If I had been able to scale up to the point where I didn't want or need outside capital, I wouldn't have started this thread, so I definitely am not trading at the size I would like to be, because I simply haven't been able to accumulate the capital that I think the strategy can accommodate.

What I mean by that is, essentially, you could trade tens of thousands of contracts with this strategy, each purchased or sold above or below your trigger price, depending on whether you were going long or short, while price action moved against you, e.g. if the strategy says go long at 1400 ES with a stop at 1380, you could buy at each and every tick below 1400 along the way until you reached 1380 and still expect to profit. I have had trades which called for me to go long at, e.g. 1250 ES with a stop at 1200 and the market went down to 1200.25 and then reversed and made the trade profitable. The scalability is practically infinite, whereas my capital is not.

As I mentioned in an earlier response, the primary reason I'm interested in working for someone else is as a hedge against certain risks in the short-term, primarily trade frequency. If those risks don't actually come to pass, I will have been better off trading for myself and not working for anyone else. I'm willing to let someone share in the profits of my strategy to mitigate that risk.
 
Quote from logic_man:

Right, but the CALMAR ratio is over 7 (196% gain in less than a year vs. 26% drawdown). Granted, that's over a smaller time period than CALMAR typically measures, but I have decent trade data going back to 2009, although the strategy has evolved since then, so that data would need to be re-checked under the current strategy.

My bet sizes are typically bigger, yielding deeper drawdowns, but going in the opposite direction and making the bets smaller to avoid those drawdowns is easy enough. If, all things being equal, you could get a 98% gain with a 13% drawdown, or 49% with 6.5% drawdown, by cutting bet size in half or by 3/4, I would think that would be attractive. I ran the same outcomes with 1% at-risk per trade and got a 43% return with a 4.9% drawdown.
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1.96/0.26=7.53 calmar ratio.



Quote from logic_man:

Real money. I have the brokerage statements to prove every claim I've made about the strategy.

Not sure if account size matters, since I'm talking about the ES, not some small cap stock. If I had been able to scale up to the point where I didn't want or need outside capital, I wouldn't have started this thread, so I definitely am not trading at the size I would like to be, because I simply haven't been able to accumulate the capital that I think the strategy can accommodate.

What I mean by that is, essentially, you could trade tens of thousands of contracts with this strategy, each purchased or sold above or below your trigger price, depending on whether you were going long or short, while price action moved against you, e.g. if the strategy says go long at 1400 ES with a stop at 1380, you could buy at each and every tick below 1400 along the way until you reached 1380 and still expect to profit. I have had trades which called for me to go long at, e.g. 1250 ES with a stop at 1200 and the market went down to 1200.25 and then reversed and made the trade profitable. The scalability is practically infinite, whereas my capital is not.

As I mentioned in an earlier response, the primary reason I'm interested in working for someone else is as a hedge against certain risks in the short-term, primarily trade frequency. If those risks don't actually come to pass, I will have been better off trading for myself and not working for anyone else. I'm willing to let someone share in the profits of my strategy to mitigate that risk.
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Because you are talking about less than 30 trades in a year, it is doubtful you'll ever raise any money with this until you have at least 100+ trades, and even then, if you're idea is to trade one market, forget it. Most institutions are looking for scalable strategies that pyramid into positions, and this one does not. Just because you're trading ES doesn't mean thousands could be traded with it 30 times per year. That's not likely to get any institutional interest because there's not enough expectancy confidence due to the infrequent trading.

Institutions that would invest are expecting a multi-million dollar portfolio traded for a minimum of 2 years, so 1 year doesn't cut it, and unless it gets to multimil after 1, it won't make that cut either.

You're better off trading your own capital with this.

Logic_man, let me invite you to be a World Cup Advisor. Talk to worldcupadvisor.com, and they'll set you up with a broker at PFG who can get you subscribers. This is probably the fastest way to further monetize your success than seeking the 1 in a million chance with an institutional investor.
 
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