only way I'll know if I am good is when the profits are banked. Opening an account with IB june 1, when they accept canadian clients. Paper trading, while it doesn't necessarily prove that a method is good, definitely will prove a method is bad. If you can't make money on paper with a method, you shouldn't even consider trading it for real, as commissions, slippage, connection problems etc will affect performance for sure.
i guess you are right! funny thing though - i never met anyone who lost at paper trading! one thing paper trading might come in handy for though! - when you take your first trade - the market goes hard against you - you cant figure how to get out the position - the program freezes - the phone rings etc etc - that paper will come in real handy if you can make it to the rest room!
I lost at paper trading the NQ... way too volatile for my system of controlling loss in my timeframe. I just got whipped around, and even trend days gains weren't all that shit hot either.
Hi C, Few things: First, the mini dow contracts are quite illiquid, especially now. You maybe should get some data and factor that into your system. Second, you mention that you haven't lost more than $125 on a trade. What was your maximum loss, though, during a single day? You should track that as well, as your broker will be looking... i.e., if your max loss is $125 using closing prices, but intraday was $2000, your broker may liquidate. Or you might be watching it, scream "sh*t!", and break your rules. Trading systems (algorithms), such as one you've developed, tend to take you in and out of trades at sensible levels. However, as a human you will not always behave sensibly. More importantly, though, are market moving events. Someone in this thread mentioned a nuclear bomb. But it doesn't need to be that big. You should plan for, or at least be aware of the possibility of a move much larger and faster than you have ever seen. When the whole market is sellers, you might place a market sell order and find it filled at an obsene level (hundreds of points away in dow contracts; 50 points away in NQ is certainly not unheard of). Most futures contracts have a daily "down limit", meaning that there is a maximum amount they can move downward during one day. However, that doesn't mean that's your maximum loss. It could go limit down several days in a row, with you unable to liquidate. Keep an escape route. Other similar contracts, options, index tracking stock, a stock with close correlation to the contract. A similar contract traded in a foreign market, etc.. Don't be a Victor Niederhoffer. Unexpected events DO happen, and much more often than statistics would lead you to believe. Understand in your mind and truely believe and accept that you really can lose your entire deposit and then some. That being said, I would say go ahead carefully.
don't put all your eggs in one basket.... futures are leverage. win more lose more. only do it if u know u can make money at it. and even then keep most of your money in safer instruments. unexpected events happen and they happen often... I've personally been caught in 2 unexpected events. back in december i think it was... the nq spiked 60 points and back in about a minute. another time there was a surprise intra meeting rate cut... don't know what nq did, but i was short ES and took about a 30 % loss. you can lose 100 percent of your "nq trading capital" and then some. especially with the new margin requirements being lowered. the only positive to all this is that you can also potentially make alot.
http://bullhaven.tripod.com/excel/YM-sim.xls My maximum account drawdown from one days close to another is $584. (This was caused by having too loose of stops on a winner). Maximum capital loss on a contract was $125. I am updating this spreadsheet daily. thanks everyone for your help.