What's your Nov drawdown?
- Thread starter a529612
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<i>"My discretionary trading account is up 3.6% for the month of November. My automated accounts are beating my discretionary accounts so far this month as usual."</i>
<i>"Going for 100% a month you're also risking to blow up any month. For the sake of your trading account I hope you have a strict risk management discipline and use lots of future puts/calls to hedge your ES bets when you run to the bathroom."</i>
We're trading one (1) ES contract per $5,000 margin balance.
Initial stops are less than -2.5pts or -$125 per contract. I believe that is -2.5% per trade risked.
When volatility is normal to high (ES intraday ranges >10pts wide) it is not that difficult to average +5pts daily. No one is shooting for the moon with that objective, at all.
+5pts per day = +100pts per calendar month
+5pts ES = $250 / $250 x one contract @ $50
$250 per contract daily <b>average</b> x twenty days = $5,000
*
That is how an emini trader can earn +100% monthly (or much more) risking -2.5% of account balance on any single trade.
Now, before the usual bullsh*t blather retorts of, <i>"one year and you'd own the entire financial market"</i> emerge, there is an obvious limit to trade size. Once that rather limited ceiling is hit, stick the <i>"it's impossible because exponential math to infinity would be..."</i> drivel where sun cannot shine.
For me & mine, I'd guess somewhere between 500 and 1,000 ES contracts will begin to create noticeable slippage. At the very most, 2000 contracts would cap my trade entry approach on an intraday basis.
I've been adapting to entering 1/2 position at initial signals, then second 1/2 position once price moves a little in favor (not against) the first 1/2 open for this very reason. In other words, if handling 1,000 ES contracts total I'd enter 500 short at 1500.75 and 500 short at 1499.50 or something similar as chart signals dictate.
So my true risk on many (if not most) trades that immediately fail is now -$67.50 per full contract or -1.25% account balance instead... trading a full allottment position as two halves.
The other side of that coin is choppy sessions create many stops at par or small overall loss instead of small overall gain going all-in and all-out. However, normal to high volatility conditions give enough directional swing to catch & ride winners from +2pts to +8pts or more.
Normal to high volatility is the majority of market condition over time, so why not build a systematic approach that works in majority of happenstance?
**
Let's concede the fact that working $5mil in capital to turn 1,000 ES contracts will not permit an average of +5pts ES daily. Assume it creates slippage issues whereas +2pts or even +1pt average daily over the course of a calendar year is maxed. Then what?
One pt ES profit X twenty days = $1,000 monthly / +20% return on $5,000
Emini traders do not have to abuse leverage in wild fashion to make money. It's the "one-contract forever" mentality which creates that perpetual myth. Retail traders are attracted to the idea of mega-points per day, because they naturally think small in terms of contract size.
Most retail traders cannot envision trading more than two contracts until their account grows. So they naturally assume they must trade like cowboys until the account grows bigger, then they can exchange reckless for caution. Wrong. Won't ever grow from small to large (sustained) without trading the same controlled-risk fashion all the way.
imo anyone can learn to average +2pts ES daily forever, no matter what. Ten ES contracts x $100 per day x 250 days annual averaged is a good living by any reasonable standards.
Key word thru all of this post is <b>average</b>. High volatility periods allow us to catch some big days, sometimes very big days. Those events go a long way in smoothing the average over course of a year.
No one needs assume any more risk per trade now than ever... market movement intraday is akin to one ~ two week's normal movement.
Some sessions just ahead of us here will be like trading thru an entire week or two between the bells, in terms of price movement. No greater risk per trade necessary, just times of being unusually busy at the keyboards.
<i>"Going for 100% a month you're also risking to blow up any month. For the sake of your trading account I hope you have a strict risk management discipline and use lots of future puts/calls to hedge your ES bets when you run to the bathroom."</i>
We're trading one (1) ES contract per $5,000 margin balance.
Initial stops are less than -2.5pts or -$125 per contract. I believe that is -2.5% per trade risked.
When volatility is normal to high (ES intraday ranges >10pts wide) it is not that difficult to average +5pts daily. No one is shooting for the moon with that objective, at all.
+5pts per day = +100pts per calendar month
+5pts ES = $250 / $250 x one contract @ $50
$250 per contract daily <b>average</b> x twenty days = $5,000
*
That is how an emini trader can earn +100% monthly (or much more) risking -2.5% of account balance on any single trade.
Now, before the usual bullsh*t blather retorts of, <i>"one year and you'd own the entire financial market"</i> emerge, there is an obvious limit to trade size. Once that rather limited ceiling is hit, stick the <i>"it's impossible because exponential math to infinity would be..."</i> drivel where sun cannot shine.
For me & mine, I'd guess somewhere between 500 and 1,000 ES contracts will begin to create noticeable slippage. At the very most, 2000 contracts would cap my trade entry approach on an intraday basis.
I've been adapting to entering 1/2 position at initial signals, then second 1/2 position once price moves a little in favor (not against) the first 1/2 open for this very reason. In other words, if handling 1,000 ES contracts total I'd enter 500 short at 1500.75 and 500 short at 1499.50 or something similar as chart signals dictate.
So my true risk on many (if not most) trades that immediately fail is now -$67.50 per full contract or -1.25% account balance instead... trading a full allottment position as two halves.
The other side of that coin is choppy sessions create many stops at par or small overall loss instead of small overall gain going all-in and all-out. However, normal to high volatility conditions give enough directional swing to catch & ride winners from +2pts to +8pts or more.
Normal to high volatility is the majority of market condition over time, so why not build a systematic approach that works in majority of happenstance?
**
Let's concede the fact that working $5mil in capital to turn 1,000 ES contracts will not permit an average of +5pts ES daily. Assume it creates slippage issues whereas +2pts or even +1pt average daily over the course of a calendar year is maxed. Then what?
One pt ES profit X twenty days = $1,000 monthly / +20% return on $5,000
Emini traders do not have to abuse leverage in wild fashion to make money. It's the "one-contract forever" mentality which creates that perpetual myth. Retail traders are attracted to the idea of mega-points per day, because they naturally think small in terms of contract size.
Most retail traders cannot envision trading more than two contracts until their account grows. So they naturally assume they must trade like cowboys until the account grows bigger, then they can exchange reckless for caution. Wrong. Won't ever grow from small to large (sustained) without trading the same controlled-risk fashion all the way.
imo anyone can learn to average +2pts ES daily forever, no matter what. Ten ES contracts x $100 per day x 250 days annual averaged is a good living by any reasonable standards.
Key word thru all of this post is <b>average</b>. High volatility periods allow us to catch some big days, sometimes very big days. Those events go a long way in smoothing the average over course of a year.
No one needs assume any more risk per trade now than ever... market movement intraday is akin to one ~ two week's normal movement.
Some sessions just ahead of us here will be like trading thru an entire week or two between the bells, in terms of price movement. No greater risk per trade necessary, just times of being unusually busy at the keyboards.
You can't be serious?
Austinp,
I am not at all trying to disagree with you since you are one of the rare individuals on ET who seems to know what he is talking about and is willing to share, but what you said seems a little out of reach.
You say that you should be able to trade 500 contracts without too many problems, and that anyone can learn to average 2 points per contract per day. By my math that is $50 * 500 contract * 2 points * 20 days = $1 million dollars per month. So everyone reading this thread can learn to eventually make $1 million per month "forever, no matter what."
Am I correct in these assumptions of what you said?
It will only take a little over a year to turn $50k initial funds into the 2.5M in capital needed for this assuming you scale up once per month and take out $5k per month to live.
So from what you said anyone, once they learn to trade correctly, can turn 50k into 2.5M in a little over a year and then make $1M per month every month. I have seen talented traders make a lot a money for a long time, but very few of those who say they are traders are talented. I will be the first to admit anything is possible, but from an empirical standpoint I would ask how many people claim to have accomplished this.
I am not at all trying to disagree with you since you are one of the rare individuals on ET who seems to know what he is talking about and is willing to share, but what you said seems a little out of reach.
You say that you should be able to trade 500 contracts without too many problems, and that anyone can learn to average 2 points per contract per day. By my math that is $50 * 500 contract * 2 points * 20 days = $1 million dollars per month. So everyone reading this thread can learn to eventually make $1 million per month "forever, no matter what."
Am I correct in these assumptions of what you said?
It will only take a little over a year to turn $50k initial funds into the 2.5M in capital needed for this assuming you scale up once per month and take out $5k per month to live.
So from what you said anyone, once they learn to trade correctly, can turn 50k into 2.5M in a little over a year and then make $1M per month every month. I have seen talented traders make a lot a money for a long time, but very few of those who say they are traders are talented. I will be the first to admit anything is possible, but from an empirical standpoint I would ask how many people claim to have accomplished this.
Austin you make great points, two things though
a) 1 ES contract per 5k margin translates into a leverage of around 13-14x versus the value of the underlying. Usually equity (day)traders wouldn't leverage up to these amounts so it's kind of comparing apples to oranges. Just as an example, my mechanical EOD (overnight) L/S equity strategies use a leverage of 1.5x and they target 1-2% return a month with low standard deviation of returns. Completely different playing field to trading futures intraday.
b) Stops are a good thing but (in theory) nobody will ever guarantee a bid/ask when you need to get out. The bigger your size the less the stops are worth. In other words, stops only define your "best case risk", not your theoretical risk.
<i>"a) 1 ES contract per 5k margin translates into a leverage of around 13-14x versus the value of the underlying. Usually equity (day)traders wouldn't leverage up to these amounts so it's kind of comparing apples to oranges. Just as an example, my mechanical EOD (overnight) L/S equity strategies use a leverage of 1.5x and they target 1-2% return a month with low standard deviation of returns. Completely different playing field to trading futures intraday."</i>
Very true... and my retort was in response to your addressing an emini trader with equity-trader mindset. We really are in two very different worlds, even though our instruments parallel.
As noted many times before, underlying value of my leveraged instrument means absolutely nothing unless I have intention to excessive for delivery of underlying. That's a completely different story.
My leverage and management is purely +$$ versus -$$... how much the notional of that is has nothing to do with anything. It could easily be eminis, commodities or FX. Only thing that matters is how the risk / reward is balanced according to account balance. That is expressed in leveraged margin, so we only need consider pure $$ made or risked and nothing else.
*
"Learning to trade" is a 1,000 step evolution. In my opinion, anyone can learn to average +2pts ES per day. First they do that in demo. That is square one.
Then in cash with one contract, which brings in the elements of emotion with $$ at risk. This results in stutter steps forward and back on the evolutionary ladder to success.
Then two contracts, which opens a new can of worms based on emotion of $$ at risk. Scale in versus all in? Scale out versus all out? Average up? Average down? Another stutter step dance sequence, forward and back on the evolutionary ladder to success.
Then new markets, new symbols, new systems or methods, tweaks to old methods ~ systems, etc. All results in further stutter steps forward and back on the evolutionary ladder to success.
**
Going from averaging +2pts per ES contract daily from demo mode to 10 contracts consistently is a lengthy process in itself. But, I see no reason why anyone (within reason) cannot.
Going from 10 contracts to 500 or 1,000 is a major mental = emotional adjustment from there.
Anyone can learn to do this... doesn't mean everyone can manage to accomplish it all. Long, long journey from beginning to end
Very true... and my retort was in response to your addressing an emini trader with equity-trader mindset. We really are in two very different worlds, even though our instruments parallel.
As noted many times before, underlying value of my leveraged instrument means absolutely nothing unless I have intention to excessive for delivery of underlying. That's a completely different story.
My leverage and management is purely +$$ versus -$$... how much the notional of that is has nothing to do with anything. It could easily be eminis, commodities or FX. Only thing that matters is how the risk / reward is balanced according to account balance. That is expressed in leveraged margin, so we only need consider pure $$ made or risked and nothing else.
*
"Learning to trade" is a 1,000 step evolution. In my opinion, anyone can learn to average +2pts ES per day. First they do that in demo. That is square one.
Then in cash with one contract, which brings in the elements of emotion with $$ at risk. This results in stutter steps forward and back on the evolutionary ladder to success.
Then two contracts, which opens a new can of worms based on emotion of $$ at risk. Scale in versus all in? Scale out versus all out? Average up? Average down? Another stutter step dance sequence, forward and back on the evolutionary ladder to success.
Then new markets, new symbols, new systems or methods, tweaks to old methods ~ systems, etc. All results in further stutter steps forward and back on the evolutionary ladder to success.
**
Going from averaging +2pts per ES contract daily from demo mode to 10 contracts consistently is a lengthy process in itself. But, I see no reason why anyone (within reason) cannot.
Going from 10 contracts to 500 or 1,000 is a major mental = emotional adjustment from there.
Anyone can learn to do this... doesn't mean everyone can manage to accomplish it all. Long, long journey from beginning to end
sounds good but it's pure theory
i've always been told that you should not try to set goals in terms of profit
anyway, interesting, i trade stocks, maybe i'll have a try at futures.
why not, two points and i'm on the way to be liquid
Great point, once real money is involved going from one contract to five is a major step. I remembered my first step up attempt at six ER contracts and got my mental stop blew right through without taking it.
I felt like a deer watching the on coming truck heading straight at me.
Still felt like that once in a while...
I felt like a deer watching the on coming truck heading straight at me.
Still felt like that once in a while...
Quote from Elite Loser:
sounds good but it's pure theory
i've always been told that you should not try to set goals in terms of profit
anyway, interesting, i trade stocks, maybe i'll have a try at futures.
why not, two points and i'm on the way to be liquid
It's not pure theory. 2 points a day, averaged out over the long haul, is not unreasonable, but it is not easy either.
Daytrading is deceptively simple. And that is why most fail. It looks so easy, but it isn't.
They do not realize that they need to prove themselves by trading daily charts first. If one cannot grasp basic trading principles on a larger time frame, there is no way they can succeed on a shorter time frame (intraday). As the old saying goes, if you cannot walk, you cannot run.
They do not realize that just because it is called daytrading, that does not mean they should trade every day. Some days are filled with opportunities for 10-20 points, whereas other days, you might as well turn off the computers and go to the beach.
And yet knowledge of trading principles is not nearly enough. Successful daytrading also requires patience, discipline, a solid work ethic, clear thinking, and a critical mind. How many people have those qualities? I know some who have NONE of them. And, none of them are traders (though I wish they were!).
Most aspiring traders will quit before they become successful. Many are undercapitalized, thinking they can quit their jobs and make big bucks at home in their underwear. If it were only so easy.
Many others quit because of failure, not realizing that success comes out of failure (better stated, failureS). I remember my failures well. I could list them, if I had to.
2 points a day is theoretical only in the sense that most wlll not reach that level. But that does not mean that that level cannot be reached.