All this talk about leverage just makes no sense to me. We have to look at the trade stats of the trader, and then given these parameters, we can figure out what size of account he needs. Its just like looking for a place to live. You start with looking at the makeup of your family. Is it just you? You and the wife? Maybe 2 kids so a family of 4? Will there also be in-laws? This question would answer if you can live in a bachelor apartment or if you need a 4 bedroom house with a separate 1 bedroom basement suite which has its own kitchen and bathroom. So we look at @sstheo 's trades. We see that he generally has an average win of 10 points. Some trades maybe go to 20 points. We see that is stop is also 10 points. We see that his largest string of losses is maybe 5 in a row, but this is compensated by a string of 8 wins in a row. (I'm just pulling this example out of a hat) Now we also take into account this volatility. So we see that he needs to increase his stop to 20 points, but this should also mean he increases his target as well. By doing this, dropping the number of contracts by 50% would help keep things equal. So now we see that given all of these parameters, he makes anywhere from $50 to $200 per day, and his worst losing day is $100. Let's even say he had 2 days in a row where he lost $100. But this would be a rare event if he continued to take trades as he should. Putting all this together, we arrive at an ideal account size. I think for most people, their accounts are much too big. A guy trading a 100k futures account but making only $500 per day feels good because his equity only goes up and down 0.5% per day lets say, but we can all agree that 80k of that account is unnecessary. Its only there to make him feel good, but it in no way adds to his ability to trade. He could have only 20k in the account and trade exactly the same. The leverage seems like its higher with a 20k account, but it should make no difference to his ability to put on a trade, unless of course he gets 20 losers in a row. @canoe , you have to remember that he is the one who put this 2% stipulation on himself. He has drastically scaled back his trading because of a psychological issue, not a stats issue. He himself said that he can trade 8 micro contracts in the account now, and yet he is only trading one. Even before this volatility picked up, he still wasn't trading the amount of contracts that he said he would. Now don't get me wrong, I'm really inspired by his success and think he is doing wonderfully, but its obvious to me that the psychological element is already creeping in, and he will in no way reach his goals because already at these small values, he is scaling back due to fear. If he fully trusted his trading and his stats, he would have no trouble trading 4 micros right now. He finished these past few days all positive, and the PnL should really have been 4 times what it was because he should have been trading more contracts. But I do also agree that for the benefit of emotional peace, he needs to scale back in this environment. There is no point in taking a big hit and starting all over again. But it just shows that this experiment will fail because the premise is already invalid. He made 2% not because of his ability to trade more contracts, but only because of the increase in volatility. When volatility dies, he will have to really ramp up the contract count to compensate. But if the fear is here now from watching the PnL go up and down quickly, it will be exactly the same when he is trading 4 or 6 contracts. Going up and down $100 in seconds is the same if trading 5 contracts but its moving slow, or trading 1 contract when its moving fast. Its the fear of the money aspect of losing $100 in seconds that gets you. This is what gets everyone when they scale up. The problem usually isn't the strategy, its the scaling part, and he has already cut back on the scaling part, so its obvious that his fear issues will dominate this experiment. (I'm not saying I can do any better, but I'm just saying that I can identify it clearly)
Beyond product selection itself, margin amount has absolutely nothing to do with the quality and confidence of setups or the management of futures trades. I'm beginning to think the only reason the OP is profitable is because he is doing things based on a single .50c tick, that would not work for his psyche with a multiple of a .50c tick. But we don't know, because the OP doesn't even know!! What is batshit insane is for a trader to not embrace volatility, of which financial is but only one of several possible forms of benefit.
@sstheo, Did you calculate other trading statistics like MAE, MFE, ETD? You should. It's gives you a better look on your trading from another angle. Basically you should improve precision and timeliness of trade entries. Good luck in your trading.
OP you were talking about margin calls. Imagine being long over the weekend I know a ton that actually were with the idea that 8200 on NQ was the support and corona is just media hype and a flu. Brutal ......... let's all learn from our fellow man. You are doing the right thing staying with 1 until the volatility shrinks in my opinion.
Got Volatility? The market was down 8% from Friday's close at one point it seemed. I bet there are "one or two" bulls who are now brisket. Mmmm. Brisket. Bears love brisket. A friend of mine took ES long of the opening lows and did 30+ ES points on that first pop today with several full contracts. Craziness. While I am far from his level of confidence (or insanity!), I have taken several longs today on the "oversold bounce" idea. Here are my last three on MNQ: The teal line is cumulative delta, and gave me the confidence to try longs on the last two. It was above the price, which shows relative buying aggression. The bigger the spread, the better, in my book. Notice how the price popped right up to meet the CD. And regarding the ongoing discussion about the quantity of contracts traded: despite the votes to the contrary, I have decided to keep trading the way I best see fit. Today, this means ONE micro contract at a time. By making my journey (and journal) public, I realize that I am inviting many different opinions. And I do appreciate all of them. As you can see, I do carefully consider all comments. But at the end of the day, it is my cash and I must bear 100% of the consequences. So maybe I am "bat#@$% crazy" for not trading 8 micros per entry right now. But I am still alive.
Good entries and exits should be the goal of all traders on all time frames. I am familiar with MFE (maximum favorable excursion) and MAE (maximum adverse excursion). ETD (End of Trade Drawdown) is new to me, but looks great also. And you just gave me the impetus to check in with MultiCharts on how I can use these metrics in my reporting. Thanks.
No, you're not. You're doing great and better than most. We're currently experiencing volatility where the market literally can move a normal daily range in seconds. Now is not the time to be scaling up.
Considering the volatility in the market, I think now is a great time to discuss the union of 4 very powerful topics that have recently come together to help me not only survive but actually stay above the 2% growth line on this account: (1) Range Trading. Since the market is trading in a range about 70% of the time, the most important idea here is learning how to properly trade in a consolidation pattern or range. Seven years ago I wrote this on MQL5: "How to identify and trade in a range." https://www.mql5.com/en/forum/10647 (2) Seeking Value. As evidenced by the Points of Control from the Volume Profile (price with the highest volume for the day), the market is constantly seeking out the price where buyers and sellers agree on price. It will tend to stay "balanced" and in large ranges unless something (news, earnings, etc.) pushes it up or down to a new area of value. (3) Floor trader pivots and Expansion at the highs and lows. One of my mentors is an expert at knowing when to "go with" the trend trade at the highs or at the lows. Just when I think the market is about to reverse because it is overbought or oversold, he says something like "staying long and targeting R3" or "this should drop to S3." It took me at least 6 months of watching him to stop thinking he was completely off his rocker. Reversion trades are so beat into me, that it took me months to even be willing to try his expansion trades. (4) VWAP Bands. Then just 6 weeks ago it all came together when I listened several other traders talking about the VWAP and the standard deviation bands. The FUSION of ideas: Zone 1 is expansion UP, seeking new value higher. Only take longs above +1SD. Zone 2 is a balance zone with reversion down toward the VWAP. Only take shorts toward the VWAP. Zone 3 is a balance zone with reversion up toward the VWAP. Only take longs toward the VWAP. Zone 4 is expansion DOWN, seeking new value lower. Only take shorts below -1SD. Notice how well all 17 posted theoretical trades worked on the MYM chart from today! So where is the range trading? It is now dynamic between +1SD and -1SD. Where is the expansion? Above +1SD and below -1SD. STOP looking for reversions in Z1 and Z4, but "go with" the trends. It is okay to go long at the highs and go short at the lows as long as you are in Z1 or Z4. I have been great at reversion trading for 13 years now, but with the new VWAP bands tool, I can clearly see when it is okay to get out of "reversion" or "balance" mode and recognize that the "value" is shifting to a new area and I can hold a trade in that direction. I consider the VWAP bands a "framework" for thinking about the market, and when the market is screaming fast, like today, the bands helped to keep me out of trouble.
Here is the same chart with the BALANCE ZONE (Z2 and Z3) in yellow, the EXPANSION UP (Z1) in green, and the EXPANSION DOWN (Z4) in red. I hope this helps you see what I am seeing: What do you do if you are in Z1 and at +2SD and you think the market is due for some down action? Of course you can trade it, just know it is a lower-probability setup than a the first longs into the zone. Keep a tighter stop, for example.