Quote from jack hershey:
I can't address your second Q but here is an answer that covers the # of contracts trading topic from my personal orientation.
I began trading contracts by phone before there were minis.
I restrict myself to trading in NOW and letting my annotated future move into the present.
I use a pipeline analogy. Below, my comments apply to the ES e mini.
During trading hours I regard six trading levels in terms of the money velocity.
The Money velocity of the market determines your composite contract size (the number you are trading in one action). There is no upper limit at times under four digits. You can note the composite limits on the three charts I will attach that describe money velocity.
Four concurrent games are played on the DOM at any given time (except for 20 minutes before FOMC announcements) and these machinations always indicate the immediate propensity for tick movement and all of the time.
I use leading indicators of ES so I have a lot of time for taking action and the level of contracts that are viable is determined in parallel with the timing.
I use an "anti- whipsaw" strategy that ensures that when a mistake is made, then , later when the discovery of the mistake is at hand, I correct the mistake and continue with the same composite of contracts in all cases. There is a small profit made when the mistake is corrected and I return to "normal".
I train others. They follow a specific regime.
No one has the right to trade "money" at the beginning of trading. What gives at trader the right to trade money is his bottom line and only his bottom line and the compounding of capital.
Capital is not grown linearly as stated in this thread. (See Austin , et al.)
For mental reasons, a person starts with one contract, doubles it and removes his original capital represented by that contract.
Then , the person starts again and repeats his first doubling.
Moving up in knowledge, skills and experience is not a factor of profits. It is a factor of time passing.
Therefore, the person trades with capital at the initial market display view for a month. Then each month, another addition is made to the market display view. This goes on for 6 months to achieve seeing the total market for the first time.
Within that period, contracts are added with each doubling: 1, 2, 4 then 5. Capital at that time has moved an order of magnitude.
Then, the sequence becomes 5, 10, 20, 25. You can see that an other order of magnitude has been reached at this time.
A typical last Monday (yesterday), as observed by those present on a second display view, 7.75 points the first 2 hours and in the pm the total reached on about 6 trades was well over 20 points.
When the doubling on 25 is reached then the three charts begin to come into play as a direct function of the money velocity of the pipeline. During low market pace, less than the potential available number of contracts is used. I have ten divisions for the pace distribution based upon 5 minute bars over a month. The distribution varies by the month in various seasons and there is little variation within a season. I use EOD bars (250) to show the variation on five pace levels to demonstrate the seasonal variability.
Accounts are sweept weekly (Fridays) and this sets the weekly saw tooth of capital used for margin backing contracts. The IB requirement for margin is different than that used by anyone posting in this thread so far.
There are several barriers most people face in being able to become traders. Until these are surpassed, a person is not a trader and will not accumulate capital in the above mentioned exponential manner (See compound interest formula).
1. Predicting.
2. Not knowing the market.
3. Not being able to see the market.
4. Deploying edges and gaming theory to make money.
After a person has gopne through adding to the market display view six times and is fluent in the routine of trading (monitoring, analysis, decion making and timely action) they experience an effect that is similar to expert use of sports memory. there are very very few people on ET who trade using sports memory.
If you do not understand this post do not worry about it.
The OP posted a very very good set of questions and he is not going to get good answers as may be seen. He is making a very astute observation about thousands of posts he has read and, thus, he formulated what he did.
Recently (ending yesterday), I have given a run through on how I trade. It was 5 presentations a day for four days. Each presentation is two hours plus or minus about 20 to 30 illustrations each. It will take the attendees 6 months of daily work to get to the point of putting into practice what they were given.
I have to dig up the three charts from some power points. I will post them soon. My trading log (4 pages a day) is attached.
