Here's the equity curve for the backtest and forward test period from 1/1/1994 - 6/30/2001. The smoothness is caused by varying the number of contracts. On average the system makes a new equity high every 12 trading days. The drawdown periods were cut short by using a variation of the Martingale bet sizing strategy. The data used for this were from the SP futures, not ES. I had to change the value per point to $50 to get the correct effect. On average 9 Emini contracts are traded per-order. The system averages about 200 trades per-year, so the R/T's are about 1,800/yr.
I think many of you are dead wrong that 40 will have trouble trading his system. I predict he will stick to it very well. Here's why. He really doesn't care about the markets. To him, it's a job and a boring one at that. To him, it's not that different from running a subway. You learn how to operate the system, then you do it and you make money. The people who have trouble with systems are the people who think they know better. They see the market is oversold and don't take that short. Oops, you just missed a 20 point trade. He won't do that, at least not until he;'s deep into a drawdown. Now I have my doubts that the system he described will work. I have never seen an intraday vol breakout system that makes money on the S&P, but he seems pretty confident and he claims to have the numbers to back it up. I have to admit that I've never tried some of the ideas he's using and some of them appear to have merit. I'm pretty stoked to see how this goes.
40-- nowhere in your posts do i read that you've actually traded............to expect to come into this game with a nicely written business plan and start making a living for yourself and your family is a pipe dream........... expect to lose all of that 40 grand.......and lose it a lot faster than you've planned......... now this doesn't mean that you will never win at this game.......that's really up to you........but it will take a lot longer than you want it to........it will cost a lot more than you hope it does......... if you're emotionally stable and care about your family, you will chalk up that 40 grand loss as a lesson in life and go on with your life with your wife and kids..........maybe one day you can dabble in the markets as a hobby.....something that will continue to cost you a bit of money but is a heck of a lot of fun and lets you keep alive the dream of punching the market for all the money you need while being free of bosses and customers.........but in the end you will keep your priorities straight.......... if you're emotionally unstable, you will blow through that 40 grand and convince yourself and then your wife and kids that you are close to "making it" in the market and throw more money into that account...........the rest of the story ain't pretty............. as much as that guy john q. public was blasted by people on this site.....he's probably closer to the truth than these others egging you on............. the reality is this game is incredibly difficult to win if you approach it WANTING to win.........it's impossible to win if you approach it NEEDING to win.........at this point in your life, you sound to me like a guy who needs to win........... just something to think about
40,, I am impressed with all you have written. You have a careful plan. "If you fail to plan, you plan to fail". You have the plan covered. I would say forget the alternative and stick with the trading otherwise you will be doomed before you start. Focus completely on the trading as if you have no back-up plan. If "you plan to fail", you will. You will not fail because you plan to succeed! If you can't give it your 100% commitment, don't even start it. There is no half commitments in trading! You will invest cash in any new business venture and trading is no different and its a heck of alot cheaper than a Subway franchise as long as you stick with the plan and not lose your smarts. Good luck and I will be following your thread.
Don't forget you are in a totally different market environment than whats in your graph. Those were boom times! We may have several years of sideways action until economic conditions improve. I am sure you already knew that.
Yes, I have thought about the psychological components long and hard. I use a Appian multi monitor card with two monitors. Here's a screenshot of what I've been looking at all day. I put a piece of masking tape over the open p/l so that I never know what the equity is during the day. On the second screen, I have the production order entry. I minimize the chart in the lower left corner so that I am never tempted to second guess my system. All I watch for is, is there a trade? Yes, enter the order, clear the popup and wait for the next one. I've got the popups set to different sounds so I can read the newspaper/book while waiting for a signal. There is nothing on the screen to tempt me to check and see how much I'm up or down each bar. I'll do away with the Auditrack screen after the Thursday close. I also have a envelope next to the screen with it addressed, stamped, and a cover letter for my favorite charity. Part of my plan is to check the trades at the end of day versus the system. For each time I don't enter a trade from the system, I have to write a $5.00 check to the charity and stick it in the envelope. If there's any checks in the envelope after the close on Friday, then I seal it and put it in the mail. My wife and I hate the bother of writing small checks. We've followed the rules for almost all the 6 months with this rule helping to keep us on the straight and narrow. Charles Faulkner in the New Market Wizards talked about using this kind of motivation to trade properly. So far it's working with us. If we don't follow a method we've invested over 2,000 hours developing, then we deserve to lose money, regardless of what the market does in the future. It's no different than the guys that can trade with discretion. If they don't follow their subjective rules, then they'll lose money as well. In 4 days I'll get a taste of the real market, but I don't expect things to be different.
40 - FWIW, I wish you the best in your endevours and will follow them with interest. It is very obvious to see, those that came into trading with false ideas, only to have them shattered and now cannot stand to see someone else succeed without the same amount of bitterness and losses. For those of you who fit this mold, grow up, learn to trade (or continue to whine about how hard it is and how it can't be done or whatever) and get a life and leave the man be. Make 'em pretty, Chris
No, I haven't traded with REAL money. I've invested a year of my time and about $12,000 buying an education before I place my first trade. I do EXPECT to make a living right from the start on Friday 11/1/2002. From what I've gathered, the necessary components of successful trading are: 1). A method that works in the current market. 2). The discipline to follow the method. 3). Enough capital to ride out the enevitable drawdowns. I believe my little system meets the first criteria. If it fails, it'll be because the intraday market volatility drops dramatically and stays there. Knowing this, if I make a $50,000 off the bat and I continue with trading, my second system trades a longer timeframe with less risk per-trade. It's been tested and is just waiting confirmation that some x factor is not lurking in the markets as some have suggested. Number 2 is where I am different than most. In working with market researchers, I know if you present limited information to a person, the person will attempt to make a decision. I've done everything I can to remove market information from my viewing, so I won't even think about an override situation. I have done everything from scheduling exercise before trading to reduce stress, to the screens, to having a daily journal where I have to account for my daily actions to keep me on target. Also, my wife and I will be taking turns during trading days to lower the risk of boredom or inattention. My hope is that someday we'll be able to automate the order process and merely monitor it throughout the day. As for number 3, I've done the calculations and figured the odds while being objective. If the odds are against us instead of with us, then I've made a fundamental blunder. Either way, the record of this journey will be open for all to see. If I don't succeed, perhaps the next person will learn from my mistakes. If I do succeed, perhaps the next person will be able to look over what I did and emulate it to make their living.
40, I think if you do succeed, you will make some extra money from a book deal. This has trading best seller written all over it.