What's The Best Way To Convert This Edge Into Money?

Quote from SplawnDarts:

I have an good edge in scalping certain futures - ES and CL for certain and it's probably portable to GC. It doesn't appear to work in the rate complex. Theory suggests it might work in other places, but I don't know for sure.

The basic nature of the edge is a custom coded indicator I would describe as "automated tape reading". The actual entry and exit decisions are discretionary but don't involve much real discretion - just things like knowing when news releases are. Automation is a possibility. I'm a good programmer and could do it myself.

Here's the last ten trading days' stats - they're pretty representative and are from trading a 1 lot on IB:
Wins 33
Losses 20
Total Trades 53
Win Rate 62%
Avg. Win $62.39
Avg. Loss $43.64
Profit Factor 2.36
Aprox. Confidence Method > Break Even 99.8%

Commissions are included in the win and loss size stats.

Those stats are a mix of long and short CL and ES trades. The splits don't look radically different except the CL trades have slightly larger wins and losses than ES (no surprise there). Losses on any given trade are limited by in-the-market stops to ~$150+commission with slippage. Wins are bounded at $150-commission for CL and $125-commission for ES. Holding time is <10 minutes so liquidity might very well be a problem if traded on big size. Overall both the quantity and quality of trades has been improving with time and I could see the PF going as high as 3 and my number of trades doubling as my execution improves.

So here's my question: how do I best make money out of this and maximize the chance I'm set up for life? I'm ~30 years old. I've got an engineering job that pays about $200K+benefits, and I would lose a small amount of non-vested stock if I quit. Job outlook is stable to positive, but I don't really love it. I don't have to quit to trade (I currently trade mornings before going to work) but could probably find more trades if I didn't have to go in. I live in a mid-priced suburban area far away from major financial centers. I don't want to move for family reasons.

So what's the best way to proceed? Should I just trade my own capital? I could allocate about $13K right now, and quite a bit more over the next year. Or should I try to take this to a prop shop or some other institutional environment? As it stands now with a retail brokerage there's zero chance of anyone stealing my approach, but I would be concerned about it in other settings.
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Your targets are too small. You're winning on noise. Six tick average wins?

$200k and you can't scrape up more than $13k? Your nut must be pretty large as a % of income, so listen to Mav and do not quit your job. I can't understand the maths you're using to equate a $13k spec to a job netting $140k.

TBH the last thing you should trading is futures. You will get run-over in CL as soon as you ramp-up in size.

You made a bit over a grand and you're wondering who to shop this to? Seriously?
 
Quote from SplawnDarts:

I can't day trade during the work day and keep the job.
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How did you trade to accumulate this sample? In terms of numbers, I think you'd be really lucky to make $200k just by tape reading/scalping futures. You could try to automate, that's probably the most reasonable idea.
 
Quote from jb514:

How did you trade to accumulate this sample? In terms of numbers, I think you'd be really lucky to make $200k just by tape reading/scalping futures. You could try to automate, that's probably the most reasonable idea.
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$200k less taxes, COBRA, no pension, 401k. He'd need to make $250k to equal the desk job.
 
Quote from Maverick74:

Yes, technically when n is greater then 30 you "can" have significant data provided your data is normally distributed, independent and little correlation. That is NOT the case here. Here is some advice, keep trading it. No one is going to back you. And yes, keep the day job, the paycheck will come in handy. And I'm being sincere when I say that.
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The trades themselves are pretty independent unless you believe some VERY odd technical theories about minute bars and tape ticks days ago driving current price. The confidence test used didn't require normality and in fact, assumes it doesn't exist (and it clearly doesn't in this case).

What obviously IS a concern is whether the underlying system is static, which on a long enough time scale clearly it isn't. If anything that argues for trying to ramp aggressively while the getting is good.

As far as backing, I find your statement odd. You're always the one pimping Topstep, and I'd say there's a 99%+ chance of passing a combine simply by presenting them appropriately sized trades out of the above method. The question is whether that would buy me anything of value, whether there's a better place to go etc...
 
Quote from Arnie:

I doubt what you have is a true edge. Its more likely just market action. I could flip a coin for a month and probably get at least one 10 day period with similar results.

Think about it. You found an "edge" trading an index??
:confused:
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I'll take that bet - flip a RNG "coin" with the reverse of my win_size/loss_size ratio (41% chance of "win" on each flip). Do a run of 106 "flips". If you can find any run of 53 consecutive flips with at least 33 winners, I'll pay you $X. If you can't find one, you pay me $X.

You game?
 
Quote from drownpruf:

Your targets are too small. You're winning on noise. Six tick average wins?
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The average win in CL is about 8-9 ticks. Other than inefficiency from a commissions perspective, and potential liquidity issues, I can't see any reason that is a problem.

Plenty of money has been made on single ticks as far as that goes.
 
Quote from SplawnDarts:

I have an good edge in scalping certain futures.
So what's the best way to proceed? Should I just trade my own capital? I could allocate about $13K right now, and quite a bit more over the next
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Thanks for writing a well thought out and detailed post. Assuming you have a real edge (its ok if it works for only short term), My recommendations:

1) I agree with your point that you should ramp up while the going is good. With 200k yearly income, you must be getting 12-13k in hand after all taxes, IRA etc. You must also have 3-4 credit cards with limits approaching 50-100k.

2) I hope you getting it what I am going to say. Just borrow cash against your cards and borrow from some friend/employer/bank a personal loan of 50-60k or so. You already have 13k, that will make it 60-70k. You should be able to borrow this much amount within 7 working days.

3) Go trade that 60-70k for 2 months. If you continue to get positive results, take your results to someone rich or some prop firm and with 2-3 months of real trading with 60-70k in account and hopefully 10-20k in profits, someone will back you up.

As another poster rightly said, if you have made just 1-3k then its hard for anyone to take you seriously at this point.

Good luck for your endeauvor.
 
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