Information About Myself [Optional Read]: About one year ago, I began to start accumulating more money than my life costs to live, so I started thinking about where to put it. I started out on Bogleheads forums, learning about investing and asset allocation. I read a lot and began to study on how to build an optimal portfolio which would accumulate the most wealth possible over the course of my working life. After a month or two, I felt that I had learned just about everything useful there was to learn about personal finance and investing, and was content to resign myself, hopefully, to average returns of about 10% per year. A mantra over there, which I never had reason to question initially, was that the market was impossible to time, and although one might get lucky, anything other than a buy and hold was essentially taking a stupid gamble with capital that you should just invest and let sit for decades in order to grow into a few million to retire on, if you knew what was good for you. However, I just couldn't accept the fact that 10% ROI was the best the market had to offer. I began to wonder why everyone didn't just take out loans at 5% interest if they were expecting 10% average returns from equities in order to boost their base ROI. I learned that this was called leverage, which everyone seemed to think was a stupid and reckless idea to utilize, but could never seem to offer me a rational reason as to why. I still believed that the market was random at the time, and that all we had to go off of was past statistics. I began to theorize that if the maximum market drawdown was about 50% over the past however many decades, I could get my portfolio leveraged somewhere around 175%, and likely make drastically increased returns in most scenarios, while avoiding going bust in the worst-case scenario. I began to look into other avenues to reduce my asset allocation's standard deviation in order to increase my leverage even further without a significant chance of going bust. I began to research ways to do this, and came upon futures and options. I began to craft some positive expectancy long-term strategies using some bull call spreads and synthetic longs while respecting my risk parameters, and I decided to send an email to my old business teacher who I vaguely knew had some involvement with the Chicago Board of Trade for some information about using options for leverage and advice on asset allocation. He replied back to me, and I don't remember everything he said, but one line in his email drastically changed the direction of my efforts. It was something along the lines of, "You're going to load up on a leveraged all-long portfolio and risk losing more than half your money in the next market crash? LOL." I was shocked that my extensively planned and researched portfolio was absurd to him, and for the first time I began to question whether the market couldn't be timed at all like I'd been taught adamantly from the beginning of my studies. I had no idea why I didn't think to wonder about it before now. I literally thought that a 50% drawdown was an eventual inevitability up until that point, and it was a ludicrous notion to him. I began to think things to myself like, 'The market went down around 50% from it's all time highs in 2007, how likely is it that there was no way to distinguish the down-trend from it's normal state for that ENTIRE time?' I started to re-examine every premise I had taken for granted; I started to look at rational ways to quantify macro-trends in the market, and how to take advantage of that information. I figured that if I could at the very least reduce major drawdowns by half with sidelining during very poor market conditions, the increased exponential growth I could capture would result in an extreme increase in capital from typical mutual funds and indexes over the years. I stumbled upon this site along several others during my research, and continued to learn just how far down the rabbit hole goes. My next thoughts were, 'What if I shorted instead of sidelined during those periods of time, the returns would increase even further..' and, 'Wow, individual sectors move much faster than the broad-based indexes, what if I traded trends within those instead?' Quickly, it finally began to sink in what a massive amount of opportunity the market provides if one could discard conventional wisdom and apply rational thought to the market despite the common opinions and conventions. Stocks move faster than sectors, option prices move much faster than their underlying, et cetera, et cetera... Since then, I've probably read over a thousand thread pages on ET on various methods, tried several out myself, lost about a third of my account in the span of a few days right off the bat due to typical over-confidence and inexperience, learned a very important lesson about risk management, and have been slowly reducing the slope of my negative equity curve over the past six months since. I have about one-third of my initial balance remaining. I was okay with my beginning account balance being tuition cost, if you will, and it's looking like I've learned enough to where I won't even need to re-load it at this point. That definitely wasn't the case when I was learning to play poker (which seems to be a pretty common theme among traders interestingly enough). All in all, I'm pretty satisfied with the way things have turned out so far. Or at least that's what I'm telling myself. My Current Perspective: And so, this brings me to today. I've been feeling like I've hit a plateau hovering just under break-even for some time, but recently I took a little time off from the market due to the birth of my second child, and I think the opportunity has granted me some perspective in order to fine-tune some of my goals. For starters, I asked myself why I continue to use actual capital when I am perfectly capable of learning from simulation. With poker, using fake money drastically reduces the quality of the game, and therefore the opportunity to develop one's skills, but that clearly isn't the case here. I could only conclude that a subtle, previously unacknowledged sense of pride and perhaps a little greed has been influencing me in this case. Also, I have actually had positive results with equities on longer time-frames, but stopped allocating my time to study and manage positions like those in order to concentrate more fully on experimenting with futures. Again, I feel that I have gotten ahead of myself instead of being patient with the process of seeking to continually optimize potential returns while continuing to develop previous success. Lastly, I feel that I have slowly over-complexified my trading style itself as I've been swinging for the fences with trading futures, seeking to learn and master too many different market conditions at once instead of building things from the ground up, in a simple manner. Recently, I read a post about how making a SINGLE tick per day in the ES futures market beginning with ONE contract amounts to an ROI for the year in the triple digits. It hit me then that I've started to drift off the mark over time, and that if I could reign things in and even focus on the goal of making a SINGLE tick per day, I could consider myself wildly successful by the standards of about 99.9% of the entire financial industry. And that, is the goal of this journal.
The Purpose of the Journal As stated above, the purpose of this journal is simply to net one tick per day with a single simulated ES contract. I will be trading for around an hour from the open. Since my goal is not necessarily to have every single trade be profitable, I will be measuring this goal by the week. A week with a total of five ticks or greater will be considered a success. The entry and exit time and price for each trade will be posted and briefly analyzed. Hopefully, common themes for unsuccessful trades will arise and I will be able to address them more specifically. The purpose of this journal is primarily to build my trading skills, so discussions such as my other positions, longer time-frame analysis, or characteristics of different instruments may be mentioned briefly, but will remain peripheral to the topic of this journal. I hope to keep my focus narrowed to the simple goal of applying rational, logical, and deductive reasoning skills to meet my profit goal for the week. I am not interested in the concepts of positive expectancy, market theory, edges, or speculation about market entities' thoughts or behaviors. I do not think they are necessary to achieve my goal at this time. I decided to post my journal to this site primarily because it is a very easy medium of archiving and subsequently accessing a record and analysis of my trades. The public and communal aspect of the site is a motivator for me to keep up with the journal, and hopefully the outcome will be mutually beneficial for both myself and any other members that choose to read or post to this. All participation is welcomed, and will be seen as an additional bonus to the intended purpose of this journal. I do not know exactly how this will turn out, but it is a goal of mine to be cordial and polite to everyone involved, while also striving to be up front about the purpose and focus of the journal as I see it while it plays out. I am not expecting more than minimal reading or communication from the forum members here, simply due to my own personal style of communication, which I have found to be too dry and lengthy for comfortable absorption by most individuals. For the time being, I have commited to myself to run the daily journal for two weeks, and re-evaluate at that time for any modifications or changes may the need arise. I am attempting to strongly emphasize logic and detailed specificity in my methodology, my presentation of it, and any resulting communication that may follow. Lastly, I will attempt to briefly explain the logical model of the market that I have pieced together, drawing from a variety of sources and members from this site, so some of the concepts may be recognizable to some readers. I do not desire to debate or change my model at this time, but rather fine tune my use of it to execute the trades themselves. My View of the Market For starters, I think it is accurate to think of the market as a certain number of transactions, at certain times, for a certain price. Time seems to be the easiest, and most common, to use on a fixed scale, so I will be doing that. Several different bar intervals may be used for additional information and to better attempt to observe the fluid nature of how the market moves, but I will reference my trades with a 5m chart. So, a certain number of transactions occur during an interval of time, and the market usually moves as the time period surpasses a few seconds. These transactions aren't usually singular negotiations, but there is a large volume of limit orders resting in the market, either being pulled or commenced as trades. When the demand for an instrument surpasses the amount of orders offered at a specific price, the instrument ticks up and orders begin to be pulled from the next lowest price available. So, it can be concluded that larger amounts of participation by market entities in a shorter unit of time drive price up or down more rapidly in most cases. Typically, the market seems to operate in surges, or waves, with longer legs and shorter legs in a given direction as the overall trend moves in a certain direction. Breaking Down the Market into Trends An easily comprehensible model of a trend seems to be the oscillation of price around a rough mean value of price over time. Trends all have a different measure of volatility, with how far they move from a mean value before less and less market entities perceive the possibility of the price of an instrument continuing to move in a single direction. Trends can be drawn on a chart, as they are by many, after two definite points of price occur in a certain direction. The other side of a trend channel can then be added touching the furthest value which occured in the other direction from the slope of the first line. This is demonstrated below. So, with no other information available, one can generate a fairly accurate of the most immediate inclination of the majority of market participants over a given period of time as early as the formation of two points of price. At this time, price will be completing the third movement of the illustrated trend, which can be differentiated into two outcomes. The volatility of the current surge towards and most commonly past the previously established mean can either exceed, or fail to exceed, the volatility of the movement from the starting point of the geometrical construction to the value where market participants decided to cease moving in the initial direction. If the previous volatility is exceeded, it seems that it has a greater chance of completing an additional wave within the existing channel, but this is not always the case. The times that I have witnessed a complete reversal of a given trend even after the volatility is exceeded usually come about when price has arrived at the bounds of an even larger and longer-lasting trend, but I do not want to go down the avenue of widening the data to be analyzed to such a large degree, or becoming too complex with analysis of larger time-frames and/or potential levels of 'support' or 'resistance'. So this is an area to work on improving. This is about as far as I have gotten in regards to the geometric price display. I have chosen to define a segment of a trend by an amount of bars which occur without the current bar surpassing the opposite end of the last bar which has advanced in the current direction, but it is more of a guideline at this point since I have not found a more effective method of deductively quantifying a single wave of a trend, and this is not always accurate in times of lower volatility as the segments decrease in length. I have illustrated this as well below. I am a currently a little uncertain about anticipating which direction which price will leave a period of sideways movement. This is another area for improvement. It seems logical that there should be some form of perceptible information about what direction is gathering momentum before the actual break from the sideways movement. The Finer Details Whether or not the volatility of the primary movement is exceeded, there also seems to be a chance that price will be repelled at the initial trend-line drawn instead of forming another trend in the opposite direction. The geometry does not offer any anticipatory information in this regard, at least that I can tell. So, it seems that volume of transactions over a given period of time within the context of any particular trend provides the specific information lacking in the pure analysis of the price geometry. It appears logical, and I have observed, that in a period of majority inclination in a specific direction, there is a greater volume of transactions pulling progressive resting orders in that given direction than there is while price recedes to establish the bounds of the trend. So, a good way to confirm the direction of a trend while it is in the aforementioned areas of uncertainty would be to analyze the relative amounts of volume for the respective segments. One of my primary rules is to avoid being on the wrong side of a movement that has accelerating participation in a current direction. This helps to act as a soft fail-safe in order to limit my losses relative to the particular time-frame that is being traded, and also to prompt me to re-examine and correct my expectations regarding the current trend if majority participation seems to be opposing it. In the same vein, it appears logical that in most cases, if there is a surge of volume and price in a given direction, and price continues in that direction on decreasing volume, momentum is decreasing and if this continues, there will soon be insufficient momentum required to continue to propel price above the mean of the current trend. In conclusion, this is the current set of logical observations and conclusions I will be using to base my trades off of. Much of the time, it is only until I have a hindsight view of a particular period of market operation that I can format all of it into the aforementioned model, so it is my goal to get my analysis closer to real-time, and also to limit my trades only to periods where I am fairly confident as to what exactly is occurring in the market at the moment. If any of my observations seems to be consistently inaccurate in contrast to the actual movement of the market, I will seek to replace it with something more accurate. I have a certain degree of attachment to my current set of conclusions, since they have been developed and improved over time, and appear to be fairly accurate thus far, but I will continue to strive to let go of any if and when I have the opportunity to replace it with a more accurate and strictly logical construct.
April 21st, 2014 - Monday Trades Trade #1 Entry: 8:33:55 [1859.00] Exit: 8:36:20 [1861.00] PnL: +2 Trade #2 Entry: 8:49:22 [1862.25] Exit: 9:00:46 [1863.50] PnL: -1.25 Trade #3 Entry: 9:09:25 [1863.5] Exit: 9:14:27 [1862.75] PnL: +0.75 Review 1. I entered this trade as the opening volume began to lessen as price headed downwards. The entry was perhaps a little early. I entered as price began to surge upwards and exited after price began to stall and move a few ticks down off the recent move. Quick exit since price was moving so fast, didn't quite know what to make of things. Rating: 1/2 2. Entered as price began to come down again off another quick surge. Bad entry, after the open with a quick trip upward with high volume, I should have anticipated the pull-back with dropping volume back towards baseline. Poor recognition of context and false reasoning, over-emphasis of imbalance of orders on the Ask. Exit could have been slightly sooner, but got out as soon as increasing volume upwards was apparent. Rating : 0/2 3. Another peak of price and volume, this one could not exceed previous volatility. Volume began to drop as further upwards movement stalled. Very good entry, but the exit was premature. Too focused on securing positive performance for the day to capitalize on additional movement. Rating :1/2 Session Synopsis Decent session I suppose. Relatively easy market conditions along with adequate entries for the most part enabled slight profits. The unsuccessful trade was ended when market behavior invalidated my hypothesis, and losses were kept down. The primary limiting factor of the day was the failure to capture the majority of the movement following the third entry. Looking forward to gathering more data and encountering days where the entries don't pan out so well.
April 22nd, 2014 - Tuesday Trades Trade #1 Entry: 8:30:09 [1866.5] Exit: 8:33:26 [1867.25] PnL: -0.75 Trade #2 Entry: 8:34:15 [1867.75] Exit: 8:40:41 [1866.50] PnL: -1.25 Trade #3 Entry: 8:41:05 [1866.75] Exit: 8:53:11 [1870.25] PnL: -2.75 Review 1. Bad entry. In hindsight, I began the day with a short bias due to other factors unrelated to the focus of this journal. I rationalized my decision with an extremely heavy imbalance of Ask orders at the time of the open, which has nothing to do with my intention of waiting until I am able to form the perception of a trend, and enter accordingly. The only saving quality of this trade was the quick exit as there was a large amount of volume with an increase of price. Rating: 0/2 2. I entered long when I perceived that there was majority participation in that direction, which isn't bad in and of itself, but like the first trade I failed to trade within the context of a formed trend, which is what my primary focus is supposed to be. Quick exit as price failed to continue higher and momentum receded. Rating : 0/2 3. I incorrectly anticipated that the market would begin to travel downwards after the opening movement upwards decreased in participation, and I expected momentum to begin to rise downward. However, I did acknowledge that there was a possibility that the drop was actually a small retracement of price on lower momentum, which is a sign of continued upward movement, but I did not know at the time which of the two cases it was. I did decide to give my trade more room, and wait for confirmation in one direction or the other, but did not expect price to go so far until my soft fail-safe was triggered and it became definitively apparent I was on the wrong side of the momentum. I think I will need to be more focused on a combination getting better entries if I am going to wait through periods of uncertainty, and cutting my trades off sooner if there isn't timely confirmation to avoid price drifting away from my position and incurring losses while waiting for clarity. Need to improve differentiation between a retrace and the beginning of a new movement (See Trade #2 on April 21 as well) Rating :1/2 Session Synopsis It has been a long time since I have traded so carelessly. It was an unforeseen challenge that I would not be able to maintain a strict discipline and focus when switching to simulated trades. I did not have a lucid mindset for my trades, and my precision, patience, and focus suffered quite heavily. I will need to begin thinking of ways to stay more focused on my goal, and utilize the specific skills and information analysis that I created this journal to experiment with and improve, otherwise I am just wasting my own time, as well as the time of anyone reading this. I have decided to wake up 30 minutes earlier and begin to exercise before the trading session as a way to hopefully address this problem, and will continue to think of additional solutions. I ended the session quite early since it became apparent that I was not in a productive state of mind. I will also think on ways to recognize this effect sooner as well. Notes -Need to wait for sufficient context to be established in order to better differentiate between the first movement in another direction versus a temporary lull in momentum. -Need to recognize and better manage states of mind which are not conducive to trading with focus and precision. Will incorporate exercise, and put more effort towards maintaining discipline even while sim trading. -Need to better balance price risk vs. information risk in trades. I need better entries to afford waiting through situations that can develop in multiple directions, as well as cutting trades off sooner when timely confirmation does not follow if they are late entries.
Since you state you are only interested in fine tuning, here are a couple of things you may want to consider that might help you in the execution of your trades. Think about the "coloring" of your bars. Consider coloring a bar with a higher high and higher low than the previous bar black and coloring a bar with a lower low and a lower high than the previous bar red. Using this new bar coloring and your definition of a segment of a trend (an amount of bars which occur without the current bar surpassing the opposite end of the last bar which has advanced in the current direction) how would your trades have looked on Monday? Being on the right side of the market is important. Consider using a pro rata volume tool (PRV) to "project", throughout the forming bar, the total volume at the bar's close. This tool may help you more accurately anticipate when there is increasing volume (accelerating participation) in the direction opposite your current position. Thanks for the interesting journal. -river
One question - why trade the ES ? There are lots of other instruments to trade, an in my opinion, many of them offer much better profit opportunities. I will be interested to see how you progress on your journey.
To River: You're correct that my focus is on fine-tuning at the moment. I definitely do not want to come across as matter of refusal to process and analyze the valuable ideas and information that others have learned, but rather, I have done so much of that already that I figured I would attempt to consolidate my efforts and try to curb the lack of definitive structure that can begin to develop without somewhat rigid and achievable goals. Thank you for your very insightful post. I applied your ideas to my previous image, and I was very impressed with the results. Taking a trade at the point which denotes the beginning of the next segment for the three opening segments would have resulted in a far superior performance to what I did at the time. I have witnessed before that some days, during the open, are able to be broken into quite long segments which easily lend themselves to high profits. Some days fall in the middle, like yesterday, where trading the segments using logic would have resulted in about 3 points until the long segment went above break-even. I've actually had a few profitable weeks trading segments only, but then there will be a day or two with numerous short segments that quickly drains all of the profits. However, I hadn't thought of calculating projected volume and using that in conjunction with the segments. I will definitely begin to incorporate your suggestion and begin to observe the results. I have a few hypothesis about attempting to link segments with volume projections already. Thank you for your input. -- Also, in regards to the comment about ES, I picked it because the most liquid futures market, so there is room for the largest and the highest quantity of market participants. I have am aware that there are other markets with higher volatility or daily ranges per contract, that would probably work better for small-time day-traders than the ES does. However, I think that the market has set principals of operation, and the instrument doesn't change that fact. Since my goal is so low, only aiming for one tick per day, and my current purpose is more suited to learning and enhancing my trading skills, I decided to stick with the ES since I do not think it invalidates either of those aspirations. Thanks to the both of you for your input. I hope that I will be able to apply these concepts and make adjustments in a lucid fashion while trading. I feel somewhat dubious looking at days like today with a pronounced trend and then seeing such a negative amount of points traded. I hope that the continual analysis, discussion, and re-focusing prompted by keeping a public journal will help me to build and refine a detached and logical trading mindset.
April 23rd, 2014 - Wednesday Trades Trade #1 Entry: 8:37:20 [1871.25] Exit: 8:42:21 [1872.75] PnL: +1.5 Trade #2 Entry: 8:45:32 [1870.25] Exit: 8:45:44 [1870.75] PnL: -0.5 Trade #3 Entry: 8:51:29 [1869.75] Exit: 8:52:14 [1870.25] PnL: -0.5 Trade #4 Entry: 9:00:10 Exit: 9:02:10 PnL: +0.75 Review 1. Entry on decreasing volume downwards at the open. I anticipated a rise in price as momentum slowed, and potentially a shift in participation to upwards movement, but based off the feedback I've received about volume and the abysmal results yesterday, I exited very quickly when it did not materialize, since the highest volume was for downwards movement. Rating: 2/2 (Logical trade, well executed) 2 & 3. After we did not get increasing participation with the upwards movement, I anticipated that a down-trend would continue to form. While keeping my trades on a much tighter leash today, I tried to enter during the increased PRV volume down I was seeing, but was wary of giving the trade too much room when this did not immediately occur. As can be seen, if either of these entries were held a little longer, they would have been positive trades. It is difficult to find the balance on how much room to give trades, since by doing so yesterday I incurred fairly large losses relative to my goal, but today I could have captured more points if I did not exit so prematurely. Even so, I do think that erring on the conservative side of the spectrum is in greater accordance with my goal. I will continue to try to fine-tune the balance for an optimal ratio of potential losses and gains. Rating : 1.5/2 (Good decision making, premature exit) 4. After my two small losses, I anticipated the possibility of two different outcomes. Either the down-trend had concluded, and majority participation would begin upwards, or there would be another surge downward after price returned to the mean. I bought once again when there was increased volume downwards, and held until the next recession began. Rating: 2/2 (Solid Anticipation; Timely Actions) Additionally, I was wanting to enter long afterwards as I perceived a greater possibility of increasing upwards participation, but price continued upward on relatively static amounts of volume and I had been basing my entries more heavily on PRV the further price moves off the extreme end of the current segment in order to attempt to reduce risk. Session Synopsis I felt much better going into the open today. I was able to exercise like I had planned to do, and it left me feeling much sharper and more clear-headed than yesterday. I intended to emphasize staying focused and logical, limiting my trades to the scope of the aforementioned model, and exiting much sooner on based on confirmation of my anticipation or lack thereof. I feel encouraged by the feedback I received, and satisfied that I was able to make some positive adjustments from yesterday's performance especially. I hope that I can continue to utilize the clear-headed, decisive, and logical mindset that I experienced this morning. Notes -Quicker decisive action based off immediate feedback in conjunction with PRV volume after entry is very effective at limiting losses, but does sacrifice potential profits. Need to continue to fine-tune the optimal ratio. -Having a high quality mindset while trading makes a world of a difference. Able to shuffle through possibilities, analyze data, and take actions accordingly much more quickly and clearly today. Cultivation of this mindset and making sure it is present while trading is a high priority.
Summary - 1 contract you'll lose due to fees, 15 contracts doesn't compare well with a fast food position and takes months to cover startup costs, 150 contracts will need around $600k risk capital and will not compare favourably with other ways of earning an income when time and risk is considered. Forget outside money as that will affect your clearing costs, your plan is not scalable, and its doubtful if you can do it without a significant risk of blowing up. Trading 3x per day to make that 1 increment profit is going to leave you negative after transaction costs at the level of one contract. You're talking about averaging 0.3 ticks per trade. Without an exchange membership and appropriate clearing costs this isn't viable. If you're running a single strategy on a single contract where liquidity is limited to say 150 lots per trade, and you average 0.3 ticks per trade, this isn't scalable to the point where you will be making anything worthwhile after fees. Lets say you fund an account with $600k, trade 150 lots, average 1 tick per day, average 3 trades per day, and trade 240 days per year. Your annual gross profits will be $450k. Out of your profits, you must pay to clear 216,000 contract sides. You are grossing $37,500 per month and paying to clear 18,000 sides / month: gross profit $2.08/side. Variable costs: Commissions: 20 cents avg over 18,000 sides (c.f. http://www.advantagefutures.com/open-an-account/commissions/) Exchange fees: 60 cents as an ECM-W , 46 as a IOM lessee (http://www.cmegroup.com/company/files/CME_Fee_Schedule.pdf) Fixed costs: $500 / month for execution platform $85 for CME data Net is 18,000 sides * $1.28 a side less fixed costs = $22,455 / month = $269,450 / year. If half of this goes for taxes, you're looking at $135k annual return on $600k. Assuming manual discretionary trading on one instrument, you've hit capacity constraints already. It is going to take you a minimum of a year to devise and test a method for successful intraday trading of ES to gross 1 increment/day, and you will need $600k. If you live in the west and are halfway intelligent, there are other things you can do to keep $135k/year which don't require $600k buy in, are more scalable, and can perhaps be done with less risk. There are ways to trade for one increment with low risk, but you don't have the infrastructure and costs to compete with the very smart people in the low latency trading business. Ergo your manual trading of 1 product taking directional risk in size to gross 0.3/tick/trade or 1 tick/day is a very poor proposition even if you succeeded! Achieving your goal would constitute neither a triple digit ROI or wildly successful by the standards of the financial industry. It isn't even enough for a family to live comfortably in Chicago, New York, or London. For many people it would be an unsatisfactory outcome financially for the work required to get to that point. And how do you value the 12-18 months of unpaid full time work required to achieve your goal? If you cannot afford to carry 150 lots its even more of a dead duck. At $60k investment and 15 lots your commission cost per side would triple. You'd be seeing $0.88/side on your 1800 sides with $585 monthly fixed costs. $999/month before tax. You'd work a quarter just to cover the $2,000 application fee to CME. And without member rates it definitely doesn't work. If you aspire to be rational, you should understand the economics of what you seek to do before you do it. It is quite possible that some of my assumptions or the data I rely on are incorrect. It is also possible that you have set off without a proper plan. Discuss. Final observation: there are other reasons why you are overwhelmingly unlikely to succeed, but this is the only one I can prove. If you're open minded, honest, and humble enough I may tell you the others. Frankly people who need help just working out the costs, and who have started down a path based on uncritical acceptance of the claims in an Internet posting are most unlikely to emerge as successful competitors.
To Blotto: Thank you for taking the time to write out a detailed critique of my goals. I will do my best to respond to the information you have presented and discuss the matter as you have requested. To begin with, I believe a key issue here is that you have projected my intentions beyond their reality, and that which I have stated as the purpose of my journal. I would also like to apologize for any ambiguous communication of my purpose and the resulting details laid out at the beginning of my journal on my part. With that being said, I definitely agree with what you have posted. Making three trades per day in order to net one tick will result in negative returns. I believe author of the post you've quoted which I referenced was only assuming one trade to make a single tick per day, and thus a triple digit ROI, but you are correct that my goal is only to net one tick per day, whilst I have been opening and closing multiple positions per day at this point. There are a few considerations I would like to put forward. One would be that I do not intend the goal which I created this journal for to fund my lifestyle, or to cease moving forward with further optimization after I am able to consistently average at least five ticks net per week. Primarily, this is a learning exercise in order to further my understanding and utilization of foundational market principles which I believe apply to a large amount of constantly active and liquid instruments. You and I agree that it would be irrational to carry out this goal with actual capital along with the expectation of generating money. I believe that I am capable of meeting this goal, and surpassing it as I continue to devote focused effort and analysis towards doing so. I do not intend to pursue my study of the market full-time as you assume, and the cost of the time I spend each morning on this journal is not a concern to me, as I have already stated that I am making excessive income relative to my current costs of living. I am definitely interested in your opinions, and appreciative of the time you've taken to begin to voice them, but one of the primary factors which consistently puzzles me when I read the opinions of numerous members of this forum is reflected in some of the statements you make at the latter end of your post. I do not think it would take an open-minded and rational individual anywhere near 12-18 months to design a strategy similar to that which I am proposing like you say. I do not think the chances of success with the purpose stated in my journal are unlikely at all. Personally, I have found time and again in this life that our beliefs lead our perception of reality and the opportunities which it provides. I have already experienced first-hand the widespread irrationality of the long-term investing community with their abject refusal to believe that more optimal strategies than buying and holding a diversified portfolio of index funds exist. I am experiencing the same thing here reading posts carrying the belief that netting a single tick per day in the ES futures market is a goal which is unlikely to be realized, or that an average net of just one or two points per day is completely unthinkable. Although it is not the main purpose of my entries here, I hope that a positive side effect of my journal will be to end up demonstrating the process of how the use of focused effort, consistent analysis, and a refusal to accept the widely held self-limiting beliefs based somewhere other than strict rationality can lead to successes most do not even think possible. I cannot claim success until it occurs, and I am more than willing to admit that the rational possibility exists that for some reason I will find myself personally incapable of doing that which I believe to be possible, but thus far I have not even come close to being presented with anything that would actually cause me to believe that the current market conditions make it highly unlikely for a disciplined and systematic individual of at least average intelligence to net one tick per trade is a logical assertion in the least.