As many of you know, I trade the ES. I've been trading the ES using only 1 contract. lately, I've been averaging $200-$500 per week trading 1 contract. I hope as the weeks go on, I will get more efficient and gradually make more as well as have at most, 1 losing day per week instead of 2. Here's my question. At what point should I move up to 2 contracts ? When I'm consistantly pulling in 10 points / week ? More ? Less ? Obviously volatility has a lot to do w/ this answer, but I'm just looking for some advice here. not necessarily a set #, ya know ? Also, i'm assuming if I'm consistant, then account size is not as important. Obviously I won't be trading with a $2k account. Assuming for arguments sake my account is $10k. When does one move up ? I know pyschologically, a move to 2 contracts would mess me up. And I know I'm not ready yet, so I ask u all for help on this one.
This will depend on you and your system. For instance what is your avg.(target) profit compared to stop loss. Could you emotionally handle 2-3 stop outs in a row. If you could emotionally how long would it take you to recoup those losses? Personally i like to add contracts a couple of trades after initial equity peaks. That wasy i don't feel disappointed if my first trade with additional contracts is a lose. On avg. I use $4000 per es contract with consideration as given above.
Please give more information on your psychological difficulties with moving from 1 ES contract to 2 ES contracts. Is a fear of the bigger dollar amounts when you have losing trades the problem or something else? Perhaps fear of fear altering your trading? Do you have a systematic method of trading? Do you have the discipline to stick to your system? Do you have the confidence to keep doing what you are doing? If you can answer a clear "Yes" to all three questions then trading 2 ES contracts takes the same mental effort as trading 1 ES contract. If you have doubts you have to stick with 1 contract until you resolve the issues creating the doubts.
Take your largest drawdown to this point, multiply it by 2, then multiply again X 2 (for 2 contracts). If you would be ok with the reality of that happening, and truly confident in your ability to make it back, then I would say you are ready. If not then continue with 1 contract until you've built yourself enough of a cushion for you to be comfortable with the above scenario. The key is to be mentally "OK with" the larger losses as well as the larger wins if and when you decide to make the leap. Just curious, how long have you been averaging $200-500/wk? Are your strategies tied to the current patterns (not just volatility), or are they easily transferrable to a wide range of market behavior patterns, such as the 2006 dead patches we saw, or the 2008 financials meltdown when 10-pt ES 5min bars were common?
I use one es contract and I make $3000-$5000 a week. Using two contracts is essentially doubling your leverage. It makes me nervous, it should make you nervous. I'd work on refining your technique before cranking up the leverage. Unless of course you have a 90%+ win rate
I think there is something fundamentally wrong with your reasoning to think that "a move to 2 contracts would mess me up" If you had the ability to accumulate profits on 1 contract on a consistent basis it should not matter for one second that you increased your allocation to 2 contracts.The system doesn't change.... Give us a heads up as to your current performance re size of account and accumulated profits are that warrant you considering going to the next level. NiN
yes, my plan is to refine my technique more. I know I can pull $1000 / week in this volatility environment on 1 contract. $200 / week is just unacceptable for the current edge I have. And for all concerned, my max stop is around 3.5 points. the average is around 2.25 point stop loss. Although I trail it to a degree every 5 mins. So after 5 mins its normal for my stop to move from around 2.25 points to around 1.5 or so. In terms of R:R, its never less than 1:1. Often its a risk of 2 points with a reward of 3, so 1 to 1.5 I guess you'd say. Sometimes more depending on how long I want to hold. Uh oh, got to take an emergency sh#t, I'll be back.
The biggest question you need to ask before scaling up your position size, were you able to trade successfully through the slow days AND the ones with high volatility? Its very easy after making some winning trades to get a false sense of confidence, then when the maket changes, everything that worked for you until now suddenly falls apart.
As a general rule I size my day trading positions in anything as leveragable as ES based on ATR. I have some maximum dollar loss I'm willing to risk on a day trade, and my trading system has a maximum stop loss based on ATR - for example my stop might be 35% of the ATR. That in turn allows me to compute the number of contracts to put on.
Not a problem there. After losing so much $ during slow days, i know exactly how to trade them now. I can make $ in any condition now. I actually will be posting all my days in the PnL thread from now on. Only problem I have, and I've said this before in other threads, is making trades when I'm already up for the day. I've also got somewhat of a problem with letting winners ride after taking a few losing trades in a row. But these are things that will be worked out. My ability to read PA is freakin' flawless. Its just some minor tweaks I need to work out before making loads of cash. Oh, and to reply to the poster NiN. there's nothing flawed in my thinking. I'm not consistantly profitable yet. I'm inconsistantly profitable. Net for each week, I'm usually up, but its sloppy and my trading still needs fine tuning. Its a confidence issue. Soon as these issues get worked out, it will be time to move up.