Has anyone tried this and succeeded? I've developed an algorithm for the ES and have had 8 months of profitability with a gain of 196% and a max drawdown of 26%. I've been optimizing it and it could have been even better. Clearly, if I can continue at that rate, I won't necessarily need a job, but I'm wondering if I could land one using that as my "resume". It'd be nice to trade OPM, so I could put even more emotional distance between myself and the outcomes. Also, having the technical resources of an established firm behind me would enable branching out into other markets, which I am dipping my toe into now. The algorithm "should" work in any market which fluctuates, which is pretty much all of them, although, of course, that needs to be verified.
You just need ONE edge to make more $ than you'll ever need. Don't mess with your strategy or diversify into other markets.
Find some hobbies outside of trading to occupy your time.
I would like to offer you some advice based on my own research in a very similar condition. Can you answer following for your strategy?
How many trades per year, average points per trade or total points per year and how much money needed in account for trading each contract? Win % and win:loss ratio also. Thanks
Edit: Also it seems you are not working currently. Whats your opportunity cost in the sense if you can get a job today, how much would it pay you per year ? Also how much capital do you have in your account today and for how many years have you backtested this strategy?
In the ES, it gives a valid trade every two days, although some days it will give multiple signals and other times it can go a while in between signals. Since you sometimes have to hold overnight, you need to be able to maintain enough margin per contract to do that. Win percent is about 68% and win/loss ratio is about 2.5 to 1. Average points gained per winning trade is a little over 10. I've just been paper trading the same concept in the Euro for a few weeks, but it appears to have about a similar trade frequency. Sometimes, the ES and Euro trades are concurrent and other times they are not. I'd like to keep adding markets until I am pretty much always in a trade. Again, that assumes that the same strategy will work across markets. The strategy has been backtested for 3 years. It gives both long and short signals, so the results don't simply stem from being long in a bull market.
My opportunity cost is pretty high, which is why I'd like to change careers and work as a trader, rather than do what I have been doing (corporate consulting). I can afford not to work for a couple of years, but if I can actually get a trading job paying me something akin to what I was making in my old line of work, that would be more of an ideal. The problem is that the potential opportunity cost of not seeing if these 8 months of profitability can be extended to eventually become years of profitability is also potentially high. Since I'm trading the ES, there is no reason why this can't scale up to trading hundreds of contracts at a time. My hypothesis is that the main limiting factor to the scalability is that you sometimes need to exit trades overnight and unloading a few hundred contracts without moving price at 3AM Easter time might be an issue, although I have seen blocks over 1000 contracts traded even at that hour. With the current win/loss ratio being so favorable, even a couple of ticks of slippage won't kill it.
I know that trading is all about results, which is why I was curious if anyone had gotten a well-compensated position (I'm talking over 6 figures in base, which actually isn't that much for a successful trader. I don't really want to go into a situation where I am only compensated on results because if I want that, all I have to do is keep trading my own account) by showing the results of their personal trading. I have an MBA from one of the top b-schools, which doesn't hurt, but I wasn't a finance major and I didn't work on Wall Street after school, I was a strategy major and all of my post-MBA work has been in that area. Trading has always been something I did "on the side", but I've finally developed something that clearly works and would like to do it full-time. So, I can either not get a job doing consulting and just trade without any other income coming in or I can get a job trading that pays over $100K base plus a results-based bonus. The problem is that no one will hire me for that second option based only on my resume, but I was wondering if they would hire me based on my results. Of course, there is some element of "You won't know until you try" to the question.
You just need ONE edge to make more $ than you'll ever need. Don't mess with your strategy or diversify into other markets.
Find some hobbies outside of trading to occupy your time.
Right. The problem is that between where I am now (having enough money to make more money than I'll ever need, if past is prologue and the results hold up) and having more money than I'll ever need, I'd like to have a salary. Yes, I want to have my cake and eat it too.
I have two hobbies outside of trading: Drinking and women. I'd eventually like to hire someone to do my trading for me so that I can dedicate more time to both.
Why not get a CTA to raise money, and/or start a friends and family account. Once you get it to a certain size have your results audited to be able to attract enough money to start a hedge fund.
You could charge a 3% fee to manage accounts and also ask for 20% of profits. If the fund gets too big, close it to new subscribers.
If this strategy is not automated, then yes, hire some traders to watch the charts for you in shifts so they are doing it 24 hours per day.
from your reply, I am deducing following numbers: # of trades per year 125. PF = (68%/32%)*2.5 = 5.31. If this is true, this is excellent number. I have developed many different strategies and the best PF I have got is 3.
Since you are holding overnight, lets say you can trade 1 contract for every 5000$ (since 4000$ is the overnight maintainance margin). Your average win is 10 points and average loss 4 points with 68% win ratio, so your average points per trade is 6 points which is 300$.
Using fixed fractional compounding, using 5000$ per contract, assuming a starting account balance of 10000$ and an average profit per trade of 300$ will result into 11 million dollars after 125 trades (1year), and you would be trading more than 2000 ES contracts on your last trade. I ran these numbers in my spreadsheet - I am confident of my numbers but I still encourage you to verify my numbers for your own good.
Now, since you will experience both profitable trades of 10 ES points and negative trades of 4 ES points instead of every trade being profitable with 6 ES points, you will experience some drag on your equity. In my experience, this drag will reduce your total equity by a figure of 2. So your year end equity would be 5 million dollars starting from 10k. I encourage you to verify this number also by looking at your backtesting.
In lieu of above numbers, what do you think ? If what you say is correct, isn't the best course of action staring you in your face? Its obvious that given the information you have given me, you should not take a job and just run this strategy as your sole income. And I haven't even included the other markets like Euro etc.
Finally, you are well educated, you can always go back to work after 8 months, if things don't work out as expected. Chances of a deal with any trading firm paying you over 5million is nil.
Interested to hear what you think of above.
Good luck
Quote from logic_man:
In the ES, it gives a valid trade every two days, although some days it will give multiple signals and other times it can go a while in between signals. Since you sometimes have to hold overnight, you need to be able to maintain enough margin per contract to do that. Win percent is about 68% and win/loss ratio is about 2.5 to 1. Average points gained per winning trade is a little over 10. I've just been paper trading the same concept in the Euro for a few weeks, but it appears to have about a similar trade frequency. Sometimes, the ES and Euro trades are concurrent and other times they are not. I'd like to keep adding markets until I am pretty much always in a trade. Again, that assumes that the same strategy will work across markets. The strategy has been backtested for 3 years. It gives both long and short signals, so the results don't simply stem from being long in a bull market.
My opportunity cost is pretty high, which is why I'd like to change careers and work as a trader, rather than do what I have been doing (corporate consulting). I can afford not to work for a couple of years, but if I can actually get a trading job paying me something akin to what I was making in my old line of work, that would be more of an ideal. The problem is that the potential opportunity cost of not seeing if these 8 months of profitability can be extended to eventually become years of profitability is also potentially high. Since I'm trading the ES, there is no reason why this can't scale up to trading hundreds of contracts at a time. My hypothesis is that the main limiting factor to the scalability is that you sometimes need to exit trades overnight and unloading a few hundred contracts without moving price at 3AM Easter time might be an issue, although I have seen blocks over 1000 contracts traded even at that hour. With the current win/loss ratio being so favorable, even a couple of ticks of slippage won't kill it.
I know that trading is all about results, which is why I was curious if anyone had gotten a well-compensated position (I'm talking over 6 figures in base, which actually isn't that much for a successful trader. I don't really want to go into a situation where I am only compensated on results because if I want that, all I have to do is keep trading my own account) by showing the results of their personal trading. I have an MBA from one of the top b-schools, which doesn't hurt, but I wasn't a finance major and I didn't work on Wall Street after school, I was a strategy major and all of my post-MBA work has been in that area. Trading has always been something I did "on the side", but I've finally developed something that clearly works and would like to do it full-time. So, I can either not get a job doing consulting and just trade without any other income coming in or I can get a job trading that pays over $100K base plus a results-based bonus. The problem is that no one will hire me for that second option based only on my resume, but I was wondering if they would hire me based on my results. Of course, there is some element of "You won't know until you try" to the question.
Another thing - I am guessing you are pretty young and have fallen behind your MBA batchmates in your career path because of your focus on trading for the last few years. So the pressure on you might be immense to at least hedge some part of the risk that the trading gig doesn't work out.
My point is - if every number you have given me is correct - and you have 8 months of proven live trading experience to support that - man, you will be far far ahead of your whole damn MBA class in two years from now.
Just make the damn process completely robotic - use your brother/mother/girlfriend to execute your trading signals, if you yourself can't execute them as the strategy suggests. Just become braindead, and you will be way ahead. One more advice, as you start building up capital, make sure you withdraw a set percentage say 3%-5% every month from your trading account and put it away as a safety net for your future life. In two years, you will have your million dollar house paid in cash when your MBA classmates would be paying their EMIs on their 500k house.
