ES Journal - 2017/2018

Discussion in 'Journals' started by Buy1Sell2, Dec 23, 2016.

  1. Handle123

    Handle123

    Morrow be a tight range day?
     
    #431     Jan 24, 2017
    beginner66 likes this.
  2. Buy1Sell2

    Buy1Sell2

    Reader---I'll show an example of margin usage here. It will be generic, but you'll get the idea. For this example, we'll use an ES contract size of $100,000. (it's a little more than that currently). We'll also assume a trading account size of $100,000
    -----So, for a trade with 10 X margin, you would need to trade enough contracts to control $1,000,000 worth of ES. That would be 10 contracts (10 time 100k equals 1 mil).
    ----A trade with 4 X margin, you would need to trade enough contracts to control $400,000 worth of ES. That would be 4 contracts (4 times 100k equals 400k)
     
    #432     Jan 25, 2017
  3. Buy1Sell2

    Buy1Sell2

    Therefore a trade at 10 X times margin that makes 5 points, would be a total of 50 points and a trade at 4 X margin that makes 5 points would be a total of 20 points.
    -It therefore follows that the same is true for trades that lose those same points.
    --So the 10X margin trades carry 2.5 times more weight than 4 X margin trades.
     
    #433     Jan 25, 2017
  4. Buy1Sell2

    Buy1Sell2

    It can be seen then that a 4X trade losing 30.25 points using our established generic numbers earlier, would be a loss of 121 points. ---and a 10X trade would only need 12.1 points to make up the difference and breakeven.--exclusive of commissions of course.
     
    #434     Jan 25, 2017
  5. Buy1Sell2

    Buy1Sell2

    This is why even though trades on a per contract basis show a loss for the year, the margin usage actually results in a positive result so far in 2017.
     
    #435     Jan 25, 2017
  6. Buy1Sell2

    Buy1Sell2

    We are 32 points higher from the buy signal I called out on Monday. If I had traded that signal with 4X margin, I would still be in, but would just now be getting to the gains I achieved by pulling the plug yesterday on the 10X margin trade.--Of course I could have just stayed in with the 10X and really done well, but over the long haul, rules told me that the positive move was to pull trade.
     
    #436     Jan 25, 2017
  7. Buy1Sell2

    Buy1Sell2

    In other words, normally we would have some pullback and I could re-enter with the 10X trade. If I had been in the 4X trade, I could have just held and let it pullback and rode it higher due to less risk. This time we really didn't have the pullback except overnight and I don't sit up all night watching charts.
     
    #437     Jan 25, 2017
  8. My system uses similar calculations when deciding on the position size. I think a more correct term to use in this case is "leverage", not "margin".

    So, in your example of account size of $100K and the ES contract size of $100K, the position of 10 ES contracts would mean 10:1 leverage.
     
    #438     Jan 25, 2017
  9. Buy1Sell2

    Buy1Sell2

    Correct. It's semantics. I use the term margin simply because I create my own margin. I never look at exchange minimums.
     
    #439     Jan 25, 2017
  10. Buy1Sell2

    Buy1Sell2

    A loss 30 points ES at 4X would be 120 points or $6,000. This would represent 6% of the trading account, but only 1.2 % of TLNW. --Calculations on total risk are always taken against TLNW.
     
    #440     Jan 25, 2017