The trader I mentioned who trades $250K, trades $2-$5 stocks. He has no secrets, he just researches good sectors with huge growth potential and plays market maker. He gets a core position for $5 or less, and holds few 100k shares. He trades in and out while they run up to $20 - $30 a share. Then he finds new companyâs to do the same again. The system is just research and a gut feel of when to buy and sell.
I believe that greater than 1% per day is possible. I have a thoroughly tested an automated system that is generally better than 1.25% per day. I've only done a small amount of live trading, but the results are consistant with testing. So, I am optimistic. Will try to do more live trading next soon. I need to either link TS to IB or write a program for the IB API (I am presently learning C++ for this task) before I do much more live trading, because most of my capital is with IB (because of their lower commissions and ability to actively trade an IRA). Norm
My drawdown has been practically 0 (less than 0.5%) in testing, even in out-of-sample data. I can't stand drawndown.. every trade I make is 'optimally' hedged and has very strict stop losses. My stop loss has never been hit at testing and its only set at 1% drawdown from entry. If it is hit then the system will pretty shut it self down so it'll only incur a full 1% once which wont wipe out the many profitible trades before it. That'll give me time to re-examine the relationships it was trading.. etc, hopefully that'll never happen either as my models are constantly updating to new relationships.
Congrats, it sounds like you've done some nice work with your system. I agree that 1% a day is very possible. I evaluate my systems with the big picture in mind. Assuming unlimited capital, how much $$$ / day is the system worth? One of my systems averages two positions, 2.5% per day per position, with stocks that trade 1M+ shares/day. Assuming I can realistically trade with a few thousand shares, or $50k per position (is that a valid assumption??), the system will max out at $2500/day. I am working on a futures systems, and soon forex, where with higher liquidity I have a higher $$$ / day goal. I must add, this is all hypothetical. I have only been forward testing for 2 months. I don't have enough money to daytrade.... soon though... Stephen - In general, what does your system trade? Reversals, trends, breakouts, earnings .... ? My system trades reversals, fades the trend.
None of the above.. I don't even look at single assets. I construct 'synthetic' assets and trade those that have the desireable properties im looking for.
I would say there are a LOT of traders doing 1% a day (on average) EASY. The truth be known, most traders of that caliber and higher are rather secretive and we never hear about them. The instrument used most often would be futures, i suspect. The E-mini contract being #1. 5% a day in a 50k acct is doable. Now, with regards to compounding. That is another horse of a different color. As accounts build with compounding, a trader must realize the emotions also will reach another level. WE ALL WERE NOT WIRED TO REACH SUCH LEVELS. So adjust accordingly................ .....Myself, i sweep the account each month and start fresh, the consistent levels are more valuable for my stomach. You heroes that have brass stomachs, well more power to ya baby.......
Well, I completely concur.. this is why I hedge like crazy and have spent massive amounts of time controlling risks, drawdown, building failsafes, etc. In fact, it is very difficult in my system to even place trades manually.. I'd just have to kill it and log in with a GUI to close out positions if needed. I want consistent profits rather than some insane amount per day. Futures trading is something I'm looking into after I get the equities system up (cause its what I know best). Why are futures so much more profitable than equities?
when i paper traded my strategy in S&P500 eminis i AVERAGED 20% a day, in real world it works out around 12.8%, mainly due to Tradestation's inability to execute market orders quickly, hopefully my daily average will raise once I switch my trading platform to a more appropriate one. Also, I must add that my strategy's approach is probably classed as "aggressive trading", suits me and works fine.