With aspirations of being a professional day trader of ES, I started paper trading May 18 this year. I think I’ve been doing well enough to begin live trading (starting with $25k). My living expenses are already covered. I’ve been using Barry Taylor’s “Better Indicators” and no other “system” to make my entries and exits. Here are my results so far: 31 trading days as of last Friday, June 30th. 356 trades, 205 gainers, 151 losers - 1.36 gainers to losers ratio, average 11.48 trades per day Profits net commissions $10,108 to date, losses $7,277.30, net profit $2,830.70, profit:loss ratio 1.39 “Expectancy” (not sure if I’m using the correct formula, although I’ve seen different formulas in the various sources I’ve studied). I used $200 for R (4 point stop loss). (% gainers .5758 X $10,108 ÷ no. gainers 205 ÷ $200) – (% losers .4242 X $7,277.30 ÷ 151 ÷ $200) = .040 Or $7.95/trade = .040 X $200 My maximum drawdown has been $1,337. My most losers in a row were 7 trades. I projected my results using one contract per $8,000 equity (rounded down). Four point stop loss being 2.5% of $8,000 of equity and considered that risk reasonable with the results so far. The projection showed compounding rich results within two~three years. I will be working to reduce my number of trades while trying to win better than $7.95/trade. How do you think I’m doing? Am I ready to start trading real money?
Is this manual or automated trading? You have a system with a positive expectancy, which is good. You also have a sufficiently high number of trades for statistical significance. The 2.5% stop loss is reasonable. On the negative side, the performance history (31 days) is too short. Can you apply your methodology to longer period to backtest it using historical data? Your average is $7.95 per trade. What's the standard deviation of all trades? The ratio of the two would give us a better idea of your risk-adjusted performance.
I'm trading entirely manually - no automation. So, I don't know how I could back test. One standard deviation of average trade is $65.49 according to Trade Station analysis. As for paper trading for a longer period ( a little funny you should mention it ), my wife wants me to keep trying for another month to see if I can still avoid going wild (she knows very little about trading or futures except what I've been able to explain / show her).
Only you can determine if you are "ready". One rule of thumb I hear is, one is "ready" when they can double their starting balance twice in sim. While it might make conservative sense, it needs to be considered that it could take a couple of years to do that. So while it was being done in sim, for those couple of years it could have been done live and the money would be real. To me it makes the most sense to start doing anything live with just 1 contract (if your trading system allows it), to test both the market's waters, and the waters of your own emotions. But good job so far, keep at it!
My advice to you is to automate your system. That would give you an ability to test it over much longer (historical) time periods. This would also remove the elements of emotional trading when you go live.
In my opinion, probably not. I always say that people shouldn't start trading "for real" until they've collated and analysed the results of over 300 consecutive trades and either paper traded (or in the case of forex traded on a tiny micro-account) for a minimum of 6 consecutive months. Ok, you've done the first part and (from what you say) done it accurately and helpfully and looked at the right kind of parameters. You have 350+ trades with a win-rate of 57.5%, and that's statistically significant (though not enormously). On the other hand, your PF on those trades is under 1.4. And you've also had a consecutive run of 7 losers, even with that strike-rate. (I can't help wondering whether you know what a small step it is from a consecutive run of 7 losers to a "long losing patch" equivalent to 25-30 losers.) This is what's making me sound very cautious. You don't know whether or not your system works in other months, in other years, and so on. I have no idea what "Better Indicators" are, and know nothing about Barry Taylor, whoever he is. I'm not casting aspersions about him. But to be honest the fact, in principle, that you're relying on a "bought-in" product and trading that exclusively, also gives me some pause for thought. I don't consider that reasonable, myself. Call me a skepchick, but I consider that very risky and optimistic, and can easily envisage several scenarios under which a wheel can come off. Sorry to sound negative, but you did ask ...
You'll probably fall flat on your face like a pancake ...maybe not immediately, but eventually I think, I don't wish anything negative upon you; I hope you become a millionaire trader -- but I still think otherwise, I'll be happy, if you can prove me otherwise...I'll be the first to high-five you, (is that really you in your avatar)...your name and face and photo kind of look too generic a bit -- almost like a stock photo for a vitamin ad, "You gotta gamble, just like me" ...When the morning comes, we'll steal the night, Trading is just like the movie Bloodsport; while investing is more like Cocoon, (i lov 80's movies, i reference them alot. Trading Places, Risky Business, Top Gun, Cocktail, Wall Street, etc) You have to know what you're doing -- Or the Market will kick your butt or kill you rather quickly,
Thanks for the advice. Don't think I can automate using the indicators I have. So far entries and exits are quite subjective.
That's a problem. To me, "subjective" means "untestable" and "unproven". Can you give an example of your typical entry/exit? What's the decision process? I've never heard about Barry Taylor or about "Better Indicators".
Thanks! Exactly the kind of feedback I was seeking. FWIW, I actually started paper trading February 23rd. But, til May 18th I was just getting a feel for the whole thing. Since May 18th I have been much more consistent. My wife and I agree that I will paper trade one more month & evaluate again.