What's a worthwhile daily take on the e-mini S&P 500?

[NoahA]

Yes, that ES risk is just too big right now. Last week, I took a $500 loss on 2 trades. I was able to keep on scalping and recover. If I was trading the MES, that loss could have been $150 (3 contracts) which is an amount I am comfortable with.

I'll have to return to ES when ranges reduce some.

As crazy as it sounds, me telling you what you should be comfortable with, I still feel like I need to warn you. Losing $150 is very painful for anyone without a $100,000 or larger account. I'm guessing you're gonna be trading $10,000 or so. Well, it won't take long till you are down a few percent already, and then bad things start to happen in your brain.

Why start out trading 3 contracts anyway if you aren't scaling? Spend just one week trading one contract, and if it turns out well, you can go to 2 for the next week and be up to 3 for the third week. But I will bet you that once you go live, lots of different things will start to happen.

Risking 5 points per trade, which is what it sounds like you are doing based on on losing $500 over 2 trades with ES, is plenty. This is $25 with the micro ES, and it means that even if you lose 4 trades in one day, you are down $100. Since you're comfortable losing $150, this means that the next day you will be able to trade with no hang-ups at all since you won't have even lost $150. Honestly, just prove to yourself that you can survive one week trading 1 micro contract and then re-evaluate.

 

[SimpleMeLike]

As crazy as it sounds, me telling you what you should be comfortable with, I still feel like I need to warn you. Losing $150 is very painful for anyone without a $100,000 or larger account. I'm guessing you're gonna be trading $10,000 or so. Well, it won't take long till you are down a few percent already, and then bad things start to happen in your brain.

Why start out trading 3 contracts anyway if you aren't scaling? Spend just one week trading one contract, and if it turns out well, you can go to 2 for the next week and be up to 3 for the third week. But I will bet you that once you go live, lots of different things will start to happen.

Risking 5 points per trade, which is what it sounds like you are doing based on on losing $500 over 2 trades with ES, is plenty. This is $25 with the micro ES, and it means that even if you lose 4 trades in one day, you are down $100. Since you're comfortable losing $150, this means that the next day you will be able to trade with no hang-ups at all since you won't have even lost $150. Honestly, just prove to yourself that you can survive one week trading 1 micro contract and then re-evaluate.

Hello NoahA and thanks for responding.

Great conversation. I agree with you.

My risk vary per trade, it is not fixed.

I am moving trading operations over to MES, instead of ES for now. And I will only risk max of 3% of account balance.

My account balance is $5000.
So on Tuesday my risk per trade will be $150 (5000 x .03 = $150)

If my first trade has a stop loss distance or risk of 10 points, then my max contract size will be 3 ((150)/(10*5*3) = 3). My risk for this trade will be $150. Risking $150 is easy and way less worry. Risking that $500 and sometimes even $600 depending market conditions at the time was scary. lmao

 

[Overnight]

...

I am moving trading operations over to MES, instead of ES for now. And I will only risk max of 3% of account balance.

My account balance is $5000...

Smart move, moving over to MES. Caution is warranted with an account size like that these days. You can hear it in the whispering of the Labor day trees...

 

[SimpleMeLike]

Smart move, moving over to MES. Caution is warranted with an account size like that these days. You can hear it in the whispering of the Labor day trees...

Thanks Overnight for the suggestion. Yes, I was forcing myself to risk too much with that ES and causing me hesitation on pulling trigger on trades.

I will always keep my risk per trade at 2 or 3% of my account balance for MES.

I got something for that MES below next week.

 

[Laissez Faire]

Laissez Faire,

Thanks for the post, and I certainly apologize I came off strong towads your approach. I agree with everything you said above.

I know a successful trader who does not use things I use like daily range. But he never said it was useless or meaningless. Just that it's not something he uses.

Actually using the daily range is probably a good thing if you are setting a certain profit target per day. For example, if you see daily range increasing, may want to choose 8 pt targets

Not necessarily quite how I use it as it's part of a predictive framework I use to anticipate the day ahead, but simply put, your daily take should somehow correlate with what the market offers.

a. Current 20 day average daily range is 59 points and offers on average 740 points per day. That's a lot of points. Approx. 12 times the daily range is offered on a daily basis.

b. At the end of January 2013 the 20 day average range was 9 (!) points and the daily offer was on average 20,50 points.

This means that today's market have an average range which exceeds 6 times of that in 2013 and a daily offer which is 37 times larger.

Capturing a 10 point swing today is not a big deal. In 2013 it was.

 

[NoahA]

Hello NoahA and thanks for responding.

Great conversation. I agree with you.

My risk vary per trade, it is not fixed.

I am moving trading operations over to MES, instead of ES for now. And I will only risk max of 3% of account balance.

My account balance is $5000.
So on Tuesday my risk per trade will be $150 (5000 x .03 = $150)

If my first trade has a stop loss distance or risk of 10 points, then my max contract size will be 3 ((150)/(10*5*3) = 3). My risk for this trade will be $150. Risking $150 is easy and way less worry. Risking that $500 and sometimes even $600 depending market conditions at the time was scary. lmao

Honestly, its just crazy to me that with a 5k account you will be risking $150 per trade, especially for someone going live from years on sim. Don't forget that with a 50% win rate, its statistically possible to have 5-7 losses in a row. Yes, it can be this many wins as well, but I'm sure if you pull the trigger and your first 3 trades are losers and you're down $500 and hence 10% of your account, you will not be in a position to put on the next trade. You will start scalping for tiny profits and do all sorts of shit you didn't practice in sim.

 

[IamTheCasino]

Honestly, its just crazy to me that with a 5k account you will be risking $150 per trade, especially for someone going live from years on sim. Don't forget that with a 50% win rate, its statistically possible to have 5-7 losses in a row. Yes, it can be this many wins as well, but I'm sure if you pull the trigger and your first 3 trades are losers and you're down $500 and hence 10% of your account, you will not be in a position to put on the next trade. You will start scalping for tiny profits and do all sorts of shit you didn't practice in sim.

Normal practice is about 3-5% of your account. If he loses 500 total on 3-4 consecutive trades he can always scale back to 1 lot to regain footing, which is also a common practice.

Its not like you have to risk 150 per trade indefinitely.

 

[SimpleMeLike]

Normal practice is about 3-5% of your account. If he loses 500 total on 3-4 consecutive trades he can always scale back to 1 lot to regain footing, which is also a common practice.

Its not like you have to risk 150 per trade indefinitely.

Hello IamTheCasino,

Yes, you are exactly right.

My account is $5000 and I am risking 3% of my account balance for every trade, this is much better. Correct, I am not risking $150 for every trade, that will vary depending on capital size and risk amount.

If I am not trading well (i.e., 5 losses in a row,etc), I simply stop trading or reduce risk down to 1% of account balance.

 

[SimpleMeLike]

Honestly, its just crazy to me that with a 5k account you will be risking $150 per trade

NoahA,

Good talk.

How is that crazy? With a $5000 account risking 3% per trade, that is only $150 per trade. That is not too bad. If I am trading bad, I scale down to 2% per trade. I lose 3 times in a roll, I stop trading for the day. When you are day trading about 2-7 trades per day for long time, you will know what is going on and if the issue is myself of the trading methods. You know when you suppose to stop trading.

I am working on some "When to Stop Trading, Money/Risk Management Rules". rules to help my money management. Like , how much loss for he week must occur before I stop trading for the week? How much loss for the day must occur before I stop trading for the day?

What I realized, the problem is not always the trading methods it is the mistakes and overtrading to recover a mistakes trades. Managing the money is not really that hard, the challenge is trying to cheat. Cheat meaning, you know your ass is in a trade you not suppose to be in, and you hold that position anyway, hoping for a win, then you get a loss. That loss is not apart of the trading method, it is a hope and pray trade. To fix this, exit instantly when making mistakes.

 

[NoahA]

I lose 3 times in a roll, I stop trading for the day. When you are day trading about 2-7 trades per day for long time, you will know what is going on and if the issue is myself of the trading methods. You know when you suppose to stop trading.

This is where you are wrong. You had a good streak you say of 16 profitable days, but how many trades were profitable? With a 50% win rate, which can be a very nice edge, you are pretty much guaranteed to get either 6 wins or 6 losses in a row. In fact, it goes as high as easily 8 or 9 when you run simulations. Bump up the win rate to 70%, and even then 4 or 5 losses in a row are well within statistical expectations over a couple of hundred trades.

So if you're stopping after 3, you're literally messing with a system that may not be broken. You say you will know what the issue is, but you really won't if you think you are doing something wrong after 3 trades. Heck, maybe you are, but 3 trades doesn't prove anything. What you will be doing wrong is actually stopping.

Look at this thread here. The poster showed how his system behaved during a period of time that covered the crisis in 2007. Yes, this is just a simulation, but what looks to be a nice equity curve actually contains many periods of sideways action.

https://www.elitetrader.com/et/thre...e-it-25k-to-trade.340739/page-21#post-5217546

When we zoom into a certain section, we see this.

From maybe trade 630 roughly to about trade 650, its way more losses than gains. The entire equity curve looks beautiful, but there are literally 20 trades that were losses or just a few tiny gains, followed by just sideways action for another 20 trades or so.

This is what I'm saying you need to prepare for. Risking 2-3% per trade sounds nice, but you will not be performing in any good condition to put on the next trade after losing 20%. To stop after 3 losses is so random, and yet to take 10 losses will cripple you with such high leverage.

I'm not saying a seasoned trader couldn't trade a 5k account with risking $150 per trade, but you're not a seasoned trader, and you already admitted to some trades just turning into scalps. After a few losses, you will start doing all sorts of crazy stuff and just playing it defensively, and this will mean there will be very few profits to overcome the trades that lose.