I still don't understand why. For my trades, price fluctuation is price fluctuation whether my account is $2MM or $10MM. Not trying to argue, just want to understand exactly what you said:
A couple of examples would be appreciated.
What do you think matters most in trading?
- Thread starter ninZa.co
- Start date
I still don't understand why. For my trades, price fluctuation is price fluctuation whether my account is $2MM or $10MM. Not trying to argue, just want to understand exactly what you said:
A couple of examples would be appreciated.
I have several examples with live accounts which clearly show the point in reality as a matter of fact.
However, for the sake of simplicity, I will create now a very simple example (which does not cover all that can happen and other reasons). You need to mentally project this on a larger scale, where an investor may have hundreds of instruments at work.
Imagine you have 2 investors and 1 given instrument.
Both guys are, for instance, short. The first one (top picture) is running out of funds. The second one (bottom picture) has still plenty.
Now, the price of the instruments raises (imagine a volatility rise for an option or a rise caused by a market correction).
The first guy gets liquidated (or the bot has no other choice than close) because he has not enough funds to comply with margin requirements. He will have a buy order at a relatively high price (top picture).
The second guy is fine. The bot can take a chance to "ride" the price move and even makes another sell (perhaps accompanied by other long positions on other instruments used for hedging).
When finally the price get down the second one has a profit, and the first one has a loss.
Availability of capital allows the algorithm to take advantage of price moves that you may not be able to exploit if instead, the capital available is insufficient.
It's as simple as that. Different capital may cause different trading outcomes, because the sequence of orders may be different due to margin requirements and price moves. It's not a matter of trade size.
Imagine this going on for months or years on hundreds of layers, and you get the picture
As a friend of mine says: "money makes money, lice make lice".
(Pictures are current real-time prices of the PUT. Note also the init margin requirement of 7.6K for 1 of these (in my trading journal I have currently 93 instruments like this under watch):
ES FOP 20240328 3200 P CME 50 E-mini S&P 500
EWH4 P3200, 599145730, mult: 50)
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That's a case of not having proper position sizing in both accounts.I have several examples with live accounts which clearly show the point in reality as a matter of fact.
However, for the sake of simplicity, I will create now a very simple example (which does not cover all that can happen and other reasons). You need to mentally project this on a larger scale, where an investor may have hundreds of instruments at work.
Imagine you have 2 investors and 1 given instrument.
Both the guys are, for instance, short. The first one (top picture) is running out of funds. The second one (bottom picture) has still plenty.
Now, the price of the instruments raises (imagine a volatility rise for an option or a rise caused by a market correction).
The first guy gets liquidated (or the bot has no other choice than close) because he has not enough margins. He will have a buy order at a relatively high price (top picture).
The second guy is fine. The bot can take a chance to "ride" the price move and even makes another sell (perhaps accompanied by other long positions on other instruments used for hedging).
When finally the price get down the second one has a profit, and the first one has a loss.
Availability of capital allows the algorithm to take advantage of price moves that you may not be able to exploit if instead, the capital available is insufficient.
It's as simple as that. Different capital may cause different trading outcomes, because the sequence of orders may be different due to margin requirements and price moves. It's not a matter of trade size.
View attachment 320457
Imagine this going on for months or years on hundreds of layers, and you get the picture
As a friend of mine says: "money makes money, lice make lice".
(Pictures are current real-time prices of the PUT:
ES FOP 20240328 3200 P CME 50 E-mini S&P 500
EWH4 P3200, 599145730, mult: 50)
You are assuming both accounts have the same number of contracts.
Are you not risking less (on a percentge basis) with the larger account
Thanks for taking the time to answer.I have several examples with live accounts which clearly show the point in reality as a matter of fact.
However, for the sake of simplicity, I will create now a very simple example (which does not cover all that can happen and other reasons). You need to mentally project this on a larger scale, where an investor may have hundreds of instruments at work.
Imagine you have 2 investors and 1 given instrument.
Both the guys are, for instance, short. The first one (top picture) is running out of funds. The second one (bottom picture) has still plenty.
Now, the price of the instruments raises (imagine a volatility rise for an option or a rise caused by a market correction).
The first guy gets liquidated (or the bot has no other choice than close) because he has not enough margins. He will have a buy order at a relatively high price (top picture).
The second guy is fine. The bot can take a chance to "ride" the price move and even makes another sell (perhaps accompanied by other long positions on other instruments used for hedging).
When finally the price get down the second one has a profit, and the first one has a loss.
Availability of capital allows the algorithm to take advantage of price moves that you may not be able to exploit if instead, the capital available is insufficient.
It's as simple as that. Different capital may cause different trading outcomes, because the sequence of orders may be different due to margin requirements and price moves. It's not a matter of trade size.
View attachment 320457
Imagine this going on for months or years on hundreds of layers, and you get the picture
As a friend of mine says: "money makes money, lice make lice".
(Pictures are current real-time prices of the PUT. Note also the init margin requirement of 7.6K for 1 of these (in my trading journal I have currently 93 instruments like this under watch):
ES FOP 20240328 3200 P CME 50 E-mini S&P 500
EWH4 P3200, 599145730, mult: 50)
In your example, I get it.
True but I think he made his point with that example and we should appreciate a healthy exchange of ideas.
It's an immediate example, deaddog, it is not meant to reflect the overall working of an actual algorithm (there could be more instruments in the folio).
The second (richer) guy might have more instruments active, and they may happen to be in the same position on that specific layer.
It's just to give a simple example of why, in general, more capital will allow you to grasp more opportunities (obviously within a certain range). This seems self-evident to me, and I am a bit surprised that it can be a matter of lengthy explanations.
It's also obvious that an account with 1MM most likely will not be traded with order sizes like an account with 10MM, or, if it is, the number of traded instruments in the folio will be different, etc.
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ah, another thing worth noticing is that, in addition to the available capital, the margin methodology also plays a significant role. I always require portfolio margining:
https://www.cboe.com/us/options/portfolio_margining_rules/#:~:text=Portfolio margining is a margin,model using multiple pricing scenarios.
https://www.interactivebrokers.com/es/index.php?f=4745&p=overview4
https://www.cboe.com/us/options/portfolio_margining_rules/#:~:text=Portfolio margining is a margin,model using multiple pricing scenarios.
https://www.interactivebrokers.com/es/index.php?f=4745&p=overview4
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What I'm having trouble grasping is how more opportunities will give you better returns.
Again my experience is mainly with the stock market where diversification is good up to a point but after that the returns tend towards average.
Margin works both ways.
No sarcasm at all, I was telling as I see it.I get the sarcasm
I've never heard of trading with; quote: "no trades at all".
Nor do I doubt you. If you say so then I'll accept it as I don't categorize you as a bs artist.
Yup, the past 18 odd months my old form of a trading method has had the shit kicked out of it, so attempting another tact, my latest journal was exploring another method, but it too is found wanting so have atm have stopped trading.PS. btw, I saw your journal about trading ASX
The volatility/chop atm on ASX is beyond what I've ever experienced, but all good, working on that atm.