So far so good. I really like your race horse analogy. But of course, most betting houses have figured that if you bet on every horse that can possibly win, there will be no money to be made. I also fully understand how you can do the ES and NQ thing, because I track both for my trading. In fact, its incredible how well it works to use ES to time NQ trades. But of course this correlation does break down, and then you're really in trouble. As for your ES options and futures example, I'm eagerly waiting. I know enough about options to know that timing is super critical. Hopefully your example shows something about time frames as well. Clearly I don't think you can hedge an ES position if are you're doing is hoping to make 5 points (unless using weekly options with the closest expiry date since these do tend to move quite well and are quite liquid). But even if lets say you wanted to protect a 10 point stop, without getting stopped out, which means you're down $500, you now need an option to go up in value by the same equivalent, or a few options of course. Anyway, will wait for the examples.
Surf's gold journal many many moons ago was a carbon copy nearly of the YM short fiasco (Surf Report) But Surf knows no humiliation and learnt no lessons. If he is now trading bitcoin with real money, I would assume two things, one, he doesn't want to hear ET criticism and, two, he will soon be sleeping in the street.
Thank you, Gotcha ! My guess is that we both need a Life, as today is Saturday and beautiful sunny day and we are jabbering on ET. For shame on us. That said, let me try and answer, somewhat intelligently, what your good observations point to as questions of what appears to be posted by someone who may have devious methods to harm the unsuspecting reader. BTW, I share your distrust of Trollers who are looking to sell something. Baron, no doubt has a way to eliminate them. Just an aside, years ago I would have bought gladly from scammers who might have found the Holy Grail. Some would call my trading, "Statistical Arbitrage" or "Delta Neutral" trading -- much information is available on a google search on those terms. I call it a 2-Horse Race and should perhaps copyright or trademark that name. Clever maybe, but descriptive of the problem; Which is Directional Trading using Stops. Directional trading is at best a coin flip when entering the trade. Heads you win tails you lose (Long wins or Short Wins). To protect from loss or to create a condition where one can be profitable with winning 6 out of 10 trades is the plan. Most know it ain't gonna work regarding of your choice of indicators, and razzle dazzle software which tells you with an arrow to go short and then exit with the up arrow. Nothing is new about trading. It is just old stuff repackaged for the newbie wannabes. Avoid trying to predict the markets -- that is my conclusion, and finally, has produced consistent income. Now let's talk about some key concepts. This is Pair Trading. Yes it can and does work. I do that sometimes but only when certain conditions excist and the markets are truly Corolated. Not the best trade in my arsenal but occasionally I do trade for example 2 ES long and 5 NQ's short as a pairs trade. Works a high percentage of the time. (Just providing an answer, not suggesting that it is Fav). Don't try this at home unless you have the rules which are not part of this discussion. You are also correct that I cannot be Long the ES and Short the ES in the same account. Even with 2 accounts which would be possible, it is Not a profitable strategy except for the brokers. Now we need to discuss a key to hedging which will permit both long and short the ES in the same account and will produce profits. The terms needed to understand this is Symmetrical and Asymmetrical returns. Symmetrically is like trading stock or the future. For each penny AAPL goes up you make $1.00 if you are long 100 shares of stock. Same with futures for every tick that ES move up, you earn $12.50 if you are long the futures contract. (Sorry if this is too "Ned and the First Reader", but one never knows who the reader's of ET are. Options are not linearly priced these are Asymmetrical Returns. If the future goes up one point the value of the option may not increase by the same 1 point of value, as in the ES example $50. There are several factors that make up the pricing formula for options. Fortunately, we need not know the meaning No need to stress, the formula is not necessary for us to make money. The important point is I can be Long The ES using options and in the same account, I can be Short the ES Future. I now am in a "2-horse race" and non-directional. I have the opportunity to make money if the ES goes up or down or even sideways. Is this Way too Complicated and hard to learn? NO. It has been said, "If you can Order a Pizza" you can learn to trade this way. You order a futures contract Long and you add 2 ES options Short (instead of anchovies) and you can do this trade with just one push of a button on your computer. WoW. Here is the "rub" -- you need to learn when to optimize the quality of the Pizza by ordering at the right time and place. So in this example, we are Short1 future at say 45 and short 2 Puts. Will try and post examples. Will open a new Thread to not ruin Mr. Doug Stewart's excellent thread.
Thanks, Gotcha. The new thread is: https://www.elitetrader.com/et/threads/fibonacci-trading-without-noise.311073/
@DougStewart hi doug how have you been since your initial post? VIDEO: which group are you in at the moment? enjoy, SHABBATA SHALOM https://www.screencast.com/t/DpeLEQidLCp
+2 ES & -5 NQ? Delta neutral? That position is extremely far from market neutral. It is in fact a very directional short trade.