Yes, very different. My automated trading system trades once per day, near the end of the regular trading hours. And uses daily price bars. When I look at price charts (usually only once per week) I look at daily and weekly OHLC bars.
After waiting four months has my account finally achieved a new high water mark. The previous high water mark, set on June 4th, was broken on October 21st. And was retested the following Friday (Oct 27th). The month ended at a new high water mark, with the account's relative net liquidation value at 170%, meaning that I have 70% profit on my total invested amount of money. Being at a high water mark is the current drawdown zero. Overview of open positions at the end of the month (IB symbol codes): futures, long: ES, ESTX50, LE futures, short: 3KTB, GE, MXP, NG, PL, V2TX, ZC, ZT ETF stock, long: DIA, EFA, EWJ, SMH, SPY, XLB, XLI, XLK This month most of the excitement came from handling margin requirements. Several instruments increased position size at the same time, resulting in warnings from IB about margin. Luckily it stayed with warnings: they did not interfere with my account. I did some tweaking to my system to make it operate not as close to the limit. I guess this is a practical limitation which you encounter when you're using a small account. With a larger account one can diversify over more instruments. This makes it less likely that all/many instruments will increase position size at the same time, resulting in margin requirement limitations. Whether it is triggered by the margin warning or not I don't know, but IB has decided to make it more costly for me to do business with them. They've sent me a message in which they explain that they exposed my account to a stress test and concluded that this account falls in the very high risk category. With a possibility that the account value goes negative. To reduce the potential financial impact for IB will they now charge a "Daily Exposure Fee". Their explanation sounds like I will have to pay them an insurance premium for the risk that I'm exposing them to. I'm not sure how much this will actually be, but I think it is about 1 USD per calendar day (30 USD per month). Going forward IB will perform this stress test daily, and the premium will be calculated daily. I ran some what-if tests in TWS and noticed that this Fee is only influenced by the position size of ES, ESTX50 and V2TX. VIX and NQ would also have a relatively large impact, but I'm not using these instruments. All other instruments which I monitor have no influence on this Fee. A few days later I received another message from IB, in which they announce that they will raise margin requirements for certain non-US volatility products (previously they already did so on US volatility products e.g. VIX futures). The list includes the V2TX futures which I use. I will have to monitor my margin usage and throttle V2TX usage a bit lower, if so required. Having to tweak and fine-tune the system on an almost daily basis due to margin limitations is a good sign: it means that multiple instruments are moving and their position sizes are getting larger. This, in turn, is a sign of a growing portfolio and account value. It reminds me of a saying which a former manager at work told me: "you're not trying hard enough if you don't have the feeling of being out of control". Being in control gives a feeling of security, but being on the verge of out of control is more exciting.
I think these margin changes are mostly driven by regulators. To run this kind of product at about a 25% vol should require margin usage of 50% even at the new elevated levels. That doesn't seem unreasonable. GAT
I don't think that IB is charging too much in margin. I am running my account close to the limit and thus I sometimes bump my head to the ceiling. In some cases are order lines refused by IB in order to prevent me from overextending my reach. What doesn't help is how margin is being calculated if I expand an existing position size. For example: I have 4 contracts of an instrument and want to expand to 5 contracts. Instead of counting 4 times maintenance margin plus one time initial margin, five times initial margin is calculated. Which is substantially larger. It is this hurdle which I encountered quite a few times, in various variations.
The great thing about trading as a hobby is that one is not driven to desperation having to make money to put food on the table.
This journal has covered the first year of using the automated futures trading system. This is a good time to reflect on the past year, and to consider objectives and goals for the coming period. As this trading system was new to me, did I have various goals and objectives for the first period. Such as: Trading: Does this system work? Is it profitable? What about the risk and volatility? Software: What software challenges will I face? Will I be able to get the software working in a reliable manner? How much work will be required for improvements and maintenance? Instruments: How do futures behave? What are their characteristics? What unexpected things will I encounter? How do I go about rolling? How does margin work in case of futures? Personal: How much time and energy will it take to get it up and running? How much for maintenance? Can I handle the volatility or does it make me nervous? I am rather satisfied with the results obtained thus far. I got answers to my questions. The graphs which I posted show that it is profitable and with what kind of risk and drawdown. Initially it took me a lot of time to create all software and to create software tools. Since then has the time spent on software development dropped dramatically. Nowadays the software runs fine and does most of the trading while I'm sleeping. It does not keep me awake at night. The system runs unobserved but monitored afterwards. It takes about 30 minutes per day to maintain and monitor the system. Plus one hour on Sunday to take a look at the bar charts of all instruments (I don't look at bar charts during the week). The volatility of the system does not cause me concern any longer, even though it fluctuates much more than my previous trading experience. All questions I had are answered by now, so I need some new goals and objectives. My new objective is to see whether I can make it generate enough profit such that it would be able to pay my yearly cost of living. This without depleting the size of the account. More precisely: the target is to be able to take out twice per year the amount I need for six months of living expenses. To avoid misunderstanding: being able to pay my bills does not depend on the results of this trading system. I have other sources of income which take care of that. If this trading system is able to provide enough profit to pay the bills would it merely provide an alternative solution. Therefore I don't have the mental pressure that this system must perform because I financially depend on it. So the title of this journal, "trading as a hobby", is still very much applicable. The current account size is not large enough to meet this objective. Looking at the results over the past year I estimate that I need to have approximately double or triple the current account size (assuming that a linear extrapolation is appropriate). If I want to achieve this desired size through organic growth I would need to wait several years. I don't want to do that so I decide to invest additional capital in this system. However, this trading system is rather risky and volatile, so I don't want to throw a large sum of money at it. Doubling, or tripling, the size is something I am willing to do, but not more than necessary. I will use a "buy the dips" approach: I will add capital when the account is in a drawdown of 10% or more. At those moments will I top up the account to the high water mark. And then wait for the next drawdown opportunity to repeat this procedure. Until the account has reached twice the current value. I think that this gradual increase is better than injecting all capital at once. The disadvantage is that the graphs which I showed thus far will be messed up for a while by this approach: suddenly it will seem that my system does not reach deep drawdowns and that these drawdowns only have a short duration. To avoid such confusion will I not publish these graphs. I had one suitable occasion, in early November, where I added some capital. After that my account kept growing, reaching several new high water marks, without reaching deep drawdowns in between. And thus am I still waiting for a next opportunity to add some capital. Meanwhile am I "enjoying the ride". Current positions (IB instrument codes): futures, long: CL, ES, M6E futures, short: 3KTB, GE, V2TX, ZC, ZT ETF stock, long: DIA, EWJ, QQQ, SPY, XHB, XLK
A bit later than usual, due to a New Year holiday. December has been a very good month for my account. The account value went up by about 10%. Looking back I notice that this uptrend started in early October and has lasted three months until now. My account went up by more than 50% in this period. Remarkably, looking back to 2016 Q4 I notice that a very similar thing happened: an uptrend for almost three months, and a total increase of 40%. As December saw a continuous increase of my account, with very little drawdown in between, was there not a suitable moment to add more money to my account. I only want to do that during moments when the account experiences a drawdown of 10% or more. The worst drawdown I experienced during December was 5%~6%. I mentioned last month my new goal for the coming year. This goal is profit-oriented whereas my 2017 goals were more educational in nature. With a new goal comes a new graph. Following the mantra "What gets measured, gets done". I have created a graph of the profit over time. The vertical axis is normalised. As my goal is to have every six months a profit equal to half a year of living expenses, have I normalised the graph to that value. To put it simply: by April 2018 do I want this graph to have increased to 2, and by October 2018 to 3. The starting point is approximately 0.9, being the normalised profit which I made until November 2017. I think that my current account size is too small to reach the April goal, but now is not the right time to add more money. My open positions by the end of December were (IB symbol codes): futures, long: CL, ES, M6E, futures, short: 3KTB, GE, V2TX, ZC, ZT ETFs, long: DIA, QQQ, SPY, XHB, XLY