Pabst & Peter Thank you both, and I am back-testing the data (to the degree that I can) see your PM I answered both of you...I won't be posting here anymore on the system. Thanks again for your help.... J-
One way to go about figuring out your maximum allowable position is to calculate your Margin to Equity Ratio or MER...take your largest anticipated position and then divide that into your equity...I forget what the different percentages reflect in the money management world, but you can easily look this stuff up on any websites that have info about CTA's...At the very least, it is something objective that is more conservative than doing something as potentially lethal as trading 300-500 lots...
Another method to consider is to figure out what you believe your acceptable maximum drawdown can be (i.e. 10%). Then assume at least a 1 and perhaps a 3 Standard Deviation move and then back into your size.
I agree.....NO reason whatsoever to trade more than 5 NQM's at a time, especially in this volatile market. If I can take 2.5 points twice a day on 5 contracts that is $10,000 a month or $120,000 a year. That is a return of over 100% per month since you only need $1850 performance bond/contract. Why would you even think of trading more than 10 at a time? Where do these people get these GRANDIOUS ideas? If you can trade well for 3 months without blowing up, then you increase size. NOBODY on this board trades 300-500 contracts.
."..if someone was going to trade a very large account and focus strictly on the NQ's, what is an appropriate lot size that can be moved quickly without a lot of slippage or am I being very naive here?" Specifically diefine quickly.
Many CTA's use an excepted industry standard of 1% of the equity under management compared to the stop used. For example: $500,000.00*1%=$5,000.00=total loss risked against stop loss being executed. So that would mean $5,000.00/$20.00=250 points. So if you trade with a stop of 10 points then you could trade 25 lots. I suggest that you scale in with 2 or 3 entries and scale out with 2 or 3 exits. Also there will be excess funds in your Commodities account which should be held in quarterly t-bills. Michael B.
That depends on the size of your account. If you have half a million dollars then trading 5 contracts (daytrade) is just as stupid as trying to trade 10 contracts with $10,000. Its just another kind of stupid. Brandon
Start out by trading 1 lots and if you're consistently successful for 90 days and your equity grows significantly, trade 2 lots... etc. consistent results, good risk-to-reward, acceptable drawdowns, and self-confident trading will help you meet the goals that you want to reach.