True the margins ar lower for intra-day. What your broker asks for margin doesn't affect the riskiness of your system. They could lower the margin to $1 and you would still have to cover your lossses. My estimate of drawdown is just that, an estimate. A better system may indeed require less capital if its drawdowns are less, or win rate higher. A worse (but still winning) system would require more capital per contract as the swings would be larger. This website was mentioned before but I will mention it again. A crude but useful simulator to test a system where you have a guess of the win/loss ration and percent winning trades. http://hquotes.com/tradehard/simulator.html
There are flaws in Kelly Value.....do the google search for the discussions... I find dividing the value by 4 or 6 is best for Futures. Kelly is hard to dig out of a drawdown, when you get down to 1 contract. One more point to remember with Kelly is that the Kelly Value is the total amount "AT RISK" per trade.......not a percentage of your bankroll divided by margin of $3,563.00 for the ES. Michael B.
You sure equities are much much much easier to trade? In what way? Easier to make money? Then taxes is the least of it. If they are so easy, then why are so many seeking the sanctuary of the ES , masochism? It's all hard, as it's supposed to be.
Dear stock777, Yes it is "easier to make money", at least in terms of amount of trading proficiency required, competitiveness and extreme market efficiency, as is the case with futures. Why are so many seeking the 'sanctuary of the ES'? Well, I think I have explained that. There are several reasons: - No volume limits, super-high liquidity, higher money velocity. I hope you understand what I mean with money velocity, it means that you can still move eve larger volume ($500K+) with low lag through liquidity problems and low adverse price change. - Extreme savings in commissions, particularly if you have an exchange seat. Let's face it, more than 90% of the volume on ES is done by serious traders, that is exchange members and institutionals that push 100 cars+ per pos, and not little retail day traders (most of which don't have a chance anyway)). - Tax benefits of trading commodities - Highest leverage - Specialization and many other things There are many reasons why people trade futures. I trade futures, almost only ES, and my reasons are most of these just named, but mainly that I want sufficient liquidity. And yes, trading stocks is comparatively easy. I trade stocks for relaxation! If I just want to chill out, I'll have a couple of J&T on the rocks, load a naz Lv2 screen and preferably a Nasdaq semi like MXIM and scalp for a few hours, just for fun. I won't make much money, because I can hardly do this so effectively with more than a few K shares, so it's just for exercize and recreation, but in % terms I'll do extremely well either way. While this is all very nice in % terms, I'm not interested in % terms, but in $ terms. If I traded the equivalent of 10 cars on MXIM, that would be $500K face value, equal to about 10,000 shares. Now go and try scalping 10 or 20 cars on ES, then go and try scalping with 10,000 or 20,000 shares on MXIM, then come back and tell me if you can tell the difference. On another matter, perhaps you should try trading futures for a few months, and then go back to stocks. I know someone here is going to say "Jeez, what's going on, the stocks have become so easy to trade!" You wouldn't be the first one to say so. Almost every futures trader has experienced that. Any futures traders here who can verify that? Don't kid yourself. The futures are so competitive because they're such nice trading mediums. But that's why you're facing the world's best traders. And unless you beat them, they beat you. Who says it's supposed to be hard? If you did an elicitation of your beliefs, you might find that this is a terribly limiting belief which could cost you a lot of opportunities. To give you a hint, your beliefs are what forges your reality and the world around you. If you think it's supposed to be hard - It's going to be hard for you - Always! Unless you realize your own limiting beliefs and mental barriers, collapse them and replace them with power thoughts, you aren't going to achieve superior performance - Ever. It is something we all should do. I can strongly recommend you get a really good and well-trained NLP master trainer to train you in Neuro Linguistic Programming, preferably with www.inlpta.com they are government-accredited and accepted world-wide. Get some private sessions with the NLP coach to reprogram your brain in a way that will dispose of limiting beliefs and yield maximum output and productivity. Good Luck, Scientist.
Who says 2 pts per day on ES is hard to do? How about 10-15 pts? By the way, advanced traders don't calculate their performance in #of points, but rather in % of daily range. Regarding 4 round turns per day, 10K per contract and "inevitable drawdowns": Sounds like you're risking a helluva lot. How about a few more trades, less than 5T stops and $3-5K per contract? Regarding "6 months of living expenses in order to allow your system to come to the long run." - Why would you even think about allowing your system something like that? If it doesn't make you money every day, or at least 80% of days, then perhaps you should redo your system. I know it sounds mean, but I'm being dead-straight with you. I like pouring some oil into the fire as occassion arises, such as this thread, full of dreamers on the quest for the holy grail or the great riches they're gain in a hurry from trading. 99% of the traders on this board are dreamers, trading for 5 pt targets with 3 pt stops and in the long run they just won't make it. Make sure you know what's right and what isn't. Scientist.
SCIENTIST, What would be a respectable performance for "% of daily range" for an advanced trader of ES?
Maniac... Hmmm... If you could play his trading experiences, step by step, wouldn't you do it? And in any case isn't it what we all do only on a much smaller scale, so if he is a maniac...?
This guy is pulling your leg. He's probably a nice guy who has a little account at Ameritrade and reads lots of posts and trader magazines. I kinda like him but he knows jack. I have been trading for several decades and just because a lot of people who write on this board don't make a lot of money, most real traders do. The largest group of real traders are in equities. You know you are dealing with an real amateur when they write things like trading is "the hardest thing in the world". Ever try patenting a commercially viable invention. Ever try building a billion dollar company. Ever try to isolate a virus. Ever try to score a hat-trick, ever try to raise a teenager? Remember, mainly unsuccessful traders think trading is hard. For most traders, its a day at the office. There are over 20 very viable trading products, bonds, equities, futures, commodities, currencies, trusts and the list goes on. If some fool thinks their thing is the only one for "true professionals" you are dealing with a non-trader, or an uninformed rank amateur. Most real traders trading their own accounts make at least $1K per day, and good one make $5K per day and more. Let me encourage new traders. Trading is easy, you can make a lot of money, and have lots of fun. Most people who post on this board more than once a month, or say once a week, in most cases will not be professional traders. They are people who have a little account and lots of time. Still, you can learn plenty here, and a couple of real traders post here all the time.
Oh, about 1.5 pts a day for an S&P 500 system trader. No, but honestly, in order to achieve high performance in the index futures, you need to preferably do 4 things: 1. Throw away systems, indicators and every other form of snakeoil / hype. No real trader uses TA. 2. Get to specialize on your market and get to know it and its psychology extremely well instead. This is paramount. 3. You need a high-performance trading approach; That is eighter complex fractal-envelope trading (SCT) or active market-making. Professional platforms today (X-Trader) are designed for both. 4. Get a plan and approach with rules and a strategy. And I don't mean some stupid mechanical trading system, like some diddle-doddle on TradeStation. I mean a well worked-out and backtested strategy, hand-and-observation-tested, yet fully quantified (Excel spreadsheets, I've built a very complex database). 5. Get a professional commission structure. The latter is in fact probably the most important. Most people don't even worry about it, which is a good reason for failure. It makes a very large difference if you're paying $4.80/RT with IB or ~$1/RT with a professional setup. It's about an 80% saving obviously. This kind of commission makes both fractal envelope trading and particularly market making very hard or impossible to do. In order to get this structure, you need to lease an exchange seat (IOM for ES and NQ is $1,900/month at CME), then contact professional brokers (in my case they've contacted me and that's the preferred way) for rates. They'll give you rates depending on your turnover. Let's say you trade 5 contracts at a time, 30 times a day, that's 3,000 RT or 6,000 sides per month. You could get something around $1-$1.50/RT probably, all inclusive. If you trade 5 contracts, 100 times a day (scalping, not even MM'ing!), that's 10,000RT/ 20,000 sides per month. As soon as you're doing 20,000 sides per month, professional brokers will actually bother opening an eye for you. Just talk about it on ET, and you'll have plenty contacting you! Sounds all very adventurous, but the reality is that pro trading is pro trading and retail trading is retail trading. Retail trading is for those who think they can buy a computer, put some money into an IB (=retail broker) account and make money. People who think that trading is the best business in the world, because it costs almost nothing for start-up. They are generally gamblers, dreamers, or in some case position traders or just plain crazy ultra-performance traders (like me, who didn't know about all this quite for quite some time and notoriously traded with IB, forced to extreme high-performance, because giving often 70% or more to IB every day). Pro trading on the other hand is about setting up a professional trading business and being prepared to accept the initial capital and expenses required, as are in any business, and still should be a lot less than in most small enterprises. Once you've trained yourself on the simulator (given the professional fees!), you need to devote full time to it, you need to be able to pay for a few months worth of trading fees, I.e. platform, seat etc and then get into it. This is how I would go about it today, anyway, given a lot of research and feedback from other pro futures trader friends, most of who've gone about it this way. About your question regarding 'respectable' performance: Given this structure, about 50% of daily range should be 'respectable', while 100% or more of daily range is very decent. Some traders make even more. I hope this answered your questions. Warmest Regards, Scientist.
It was once mentioned by Bill Williams (PhD, Founder of Profitunity), "We want to take 90 percent of any trend out, which is to say we want to buy on the bottom 10 percent or we want to sell on the top 10 percent;" "What that allows us to do on a very consistent basis is take three to five times the amount of the trend out of the market. So if the S&P has a trend run during the day of 500 points, we're really looking for 1,500 to 2,500 points out of that 500-point move."