If the systems had exactly the same drawdown characteristics and the same risk, but the profits of one system were greater, then you should choose the one with the greater profit. When risk is constant, and reward is greater, you have a better risk:reward ratio. However, if you do not have the available information, then you should trade neither system. Doing so would be like playing roulette without knowing how many numbers are on the wheel. Even if someone tells you they have been making $X per bet, following him without proper knowledge of the true probabilities of losses, drawdowns, and risk of ruin would be like following a lemming. Any minute you could find yourself falling off a cliff. -Raystonn
If trader A can pull pull 4 points on a few contracts you would think he could jsut as easily pull 4 points on 50, dont trade the ES much but its not like 50 contracts would cause major slippage, (I dont think anyways) you may have a couple of partials, on the real good trades, but i dont think there would be much of a difference between 50 and 5. apart from account size, and psychology. -Dan
I voted for the option that made the most money. How do you know that its possible to scale up on the option thats only trading a few contracts? It may be limited by the nature of the trade.
have you seen the size that gets moved on the ES?? its not like the market is running away from 50 contracts, so i cant see how a trader who trades 5 cant scale it to 50, maybe one in every 100 trades youd get a partial.
OK, maybe it is time to tell why I made the poll. It looks like the 2 ES guy is coming up and from a 2 to 1 disadvantage now it is only less popular by 2 to 3. I was kind of guessing a 50-50% popularity, but I wanted to see what others think. Yes, several responders argued that if everything else is the same, #1 trader should be chosen, because ES is so liquid that it should easily accomodate a trader trading 50+ contracts without disadvantage. I agree... BUT! There is a certain fascination with size among traders, thus the 40% vote for trader #2 (at this point). I am taking a guess that if newbies were asked, it would be even higher for #2. Let me tell you guys a fairytale. I dreamt it up, it never happened and any familiarity to existing companies, I will deny: Once upon a time, there was a company that had a few trading strategies and they sold it to trader wannabes on the internet in chatrooms. The company had only a few employees, programmer, a few teachers, PR guys,etc. Of course the teachers were the stars of the company because they brought the costumers/students in. They traded real money live, and taught the students online explaining what they did and why. There was one teacher, let's call him Fred. He was very good, he was averaging 2 ES a day. Anybody who trades futures knows that consistently achieving that one can make a decent living. Students loved Fred, he was a good teacher and very approachable. Business was good for the company, but the PR guy of the company, let's call him Andre, wanted more. Since they couldn't make Fred more profitable, they played on something else. They realized that traders are fascinated by size. Fred didn't like to trade big, his comfort zone was 3-5 cars, occasionally 10. But that was not enough. So Andre came up with an idea: Let's advertize, that Fred is trading 50-200 contracts, that he is a big swinger, although in reality he was trading a simulator account or just a few cars. They thought, what's the harm? Fred is profitable, he makes 2 ES a day, but people like big things. That is not their fault, it is the students' fault who like to believe that they are part of something big. It is like Santa. It is a lie, but it is a wonderful lie. And they were right. Once they started to advertize Fred as the big swinger, new students started to come like crazy. They didn't come for the 2 ES per day average (which again, an excellent result by itself) but they came because they heard about this mastertrader who trades 200 cars at a time. I don't remember the rest of the dream, because my wife woke me up and wanted to have sex, so make up an end if you feel inclined to do so... The moral of the story is that, well, for quite a lots of people (and for my wife), SIZE MATTERS!!!!
Not sure I totally agree with you. Sometimes time matters as well. If I can take one high probability trade a day with 50 contracts and make 2 points with very little stress then why would I bother wasting a lot more time trading half the size for 4 points. Saving a few bucks on commission isn't worth the added stress of watching the market go up 3 and down 2 and up 1 and so on. I am less worried about the number of contracts as I am the time I am in the market.
I would agree. I think most of us agree that about 90 - 95% of traders are not able to make a profit. If you have 2 that do make a profit who really can argue with how they do it.
Well since i live in Aus: Trader 2 has a beautiful advantage: he creates much more brokerage which in aus is tax deductible.