This 1.5% figure is with your account and not the hedge fund account? With a $5 Million hedge fund account 1.5% of $5 Million is $75K or 750 lots on a 1pt avg loss, or 375 lots with a 2pt avg loss or about 187.5 lots with a 4 pt avg loss. You must one of the biggest ER traders on ET if my #'s are correct.
You can't really say for sure what the cause is but you eventually get to the point where you can say with high confidence, "I've seen this before and it's going to do...."
That was in the hedge fund's account but I didn't come anywhere near those numbers on trade. The liqudity isn't there to handle large orders. The reason I took the ER2 on that day was simply because it offered me a trigger while the ES did not. The ES and/or a combination of different contracts is my most preferred method.
excellent thread! could somebody explain to me "risking <2% account per trade" as it applies to trading stocks intraday? My understanding is that the risk level is determined by the stop placement and position sizing so that when your stop is hit your total loss is less than 2% account. But what about gaps? Even intraday, after a trading halt a stock can move 50% (or more). So, an account can be wiped out by just one trade that relies on a stop too close to the entry point. Alternatively, if I misunderstood the rule, one always assumes 50 or 100% max loss per trade and trades small (2-4% of the account size). But in this scenario, one has to place an insane number of tiny trades to make full use of the buying power.
You just hit on one of the major issues I've mentioned before about many author's interpretations of kelly (and any type of optimal) bet sizing. If you base the optimal fraction on a finite historical worst case loss, and the future negative returns/stops never exceed that, you are ok. However, what no one seems to mention is that gaps/fat tails throw much of that theory out the door. The only guaranteed insurance policy is to bet much smaller under the assumption of possibility of a much larger volatility then expected. The downside as you mentioned is slower growth. Take away all of the theory for a moment. If you only bet a finite amount of your bankroll per a bet (not the same as optimal fraction), that is the absolute worst case amount you could lose per that bet (assuming no leverage and ignoring slippage/comm). P.S. I too am a huge fan of money management as a close approximation to any type of holy grail if ever there was one. You just need to be careful about defining and applying it.
Indeed, you do need to be careful. You need to have a circuit breaker on your platform and you have to be disciplined enough to know when you have to hit the trade out button. To use a positioning/scaling/averaging/whatever you want to call it method, you have to have predefined limits that trigger the trade out. Going bigger, and bigger, and bigger, in the face of cascading losses is a recipe for disaster.
Why aren't you shorting the bounces? You basically added to a losing position and got lucky. I'm sorry to say it, but you still don't understand how the market works. I hate to say it to you because you've put in a lot of work on this.
Your system doesn't work for stops for 1 main reason. You're buying on the way down. When the rest of the world is selling. Think about that for a second...... You're logic is a little flawed.
How long have you been trading *profitably*? Do you trade index futures or stocks? Do you understand elasticity, value areas and mean-reversion? You're either new to trading or you do not have a firm grasp of intraday market behaviour. That's a nice way of me saying that your logic is amatuerish at best. Mike
Yes, EXACTLY. I'm buying when the rest of the world is selling. You think about that!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 95% of futures traders fail and I'm buying what they are selling. You can't see that this is a SUPERIOR Way????? ROLF like I've never LMFAO before. Hillarious dude.