A quick Q&A with a very experienced futures trader

aphexcoil · Sep 7, 2002

I recently asked Mr. Hershey some questions regarding futures trading and I would like to share his responses with you.

I have heard you say that a good ES trader should average 35 a day on his risk capital. Did I understand you correctly?

I target that income level for a person who has gone through the first four stages of assimilation beginning with the simplest algorithm that yields success. I feel that adding levels of means to better performance three additional times gets a person to a basic operating level of 35% of margin trading intraday. The basic challenge to get into commodities is not a choice of either paper trading or jumping in with cash. The challenge is
to successively advance through a series of algorithms where each stage of the way a person debriefs over and over and becomes 100% conscious of how that given level of algorithm works before enhancing the algorithm to another level. The key consideration is to trade briefly and debrief comprehensively as time passes as you are presented with the realm of
possibilities the market presents to you. This approach is not a main stream way of doing things; you only get to this orientation by eeing person after person go through such processes. Thus four intial stages of effort takes a person to an operating level where 35% of margin is practical as a standard.

Look at ES as hving a margin requirement of 3,000 bucks for intraday trading. For postion trading it is usually twice as much. You can immediately see that you are being told a basic and fundamental thing about commodities risk. A unit is 50 dollars. That is, the smallest value to the left of the decimal point represents 50 dollars so 60 units is 100% of margin and 35% is around 20 units. There are four parts to a unit so 80 parts or incremental steps represent 35% of margin.

Today the market had a high/low of 11 units and they were traversed five times in full or in part. it looks like 2 am trades and one pm trade. half of the potential of these three is about 12 units, thus today is about 8 units short for that level of effectiveness.

This allows us to easily see that some days have low volatility and they can't be expected to give us a normal result. This was a good day to be sidelined if you are a beginner it turns out.

You have not developed a plan for getting into commodities. Elsewhere there is a person who is regarded as potentially competent by participants here who capable of making that judgement. As a self test anyone can determine if they are potentially competent. I believe that such a person can sit
down and sketch out four levels of trading that can be done one after another to succeeed at each level and use each successive level to build upon. Or better still they can find someone who has gone through such levels and is presently successful. Seeking is an interesting enterprize. Lots of poeple here are doing a process of getting up to speed. For anyone to be helped in that process, two possibilites exist: going to where that person
is or presenting to that person where to go to. As you take laps here we see how it works for you.

Recently there was an appraisal made by a person doing 7% as a daily level. There is little difference between 7% and 35%; basically they represent stages of success and that is all. Moving from one operating level is just a matter of iterative refinement. Unfortunately most people do not see how iterative refinement works. I mentioned sorting trading into two piles: success and failure. I suggested leaving successful stuff alone and debriefing (refining) failures to just stop doing whatever wrong. This was helpful to a person here.

I strongly believe that success breeds success. Simple success lays the foundation. The 30 minute alternative to Rick's Fdates starts anyone off at 75,000 a year. those two examples are ones of either going to where a person is (fix busted stuff) or just telling a person how to make 75,000 a year. Either way an starting point comes into the picture.
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A quick Q&A with a very experienced futures trader

aphexcoil