That's terrible, glad you bounced back and lived to tell us about it. A warning to all. Losing profits feels worse than losing your starting capital, at least for me.
your current run up is probably due to trending of the market which happen to be in line with you bias. There no strategy in this world that could give you 2:1 and a 65-70% success rate for long period of time. You will outperform 99% of fund managers even with 50% winrate.
He could get lucky early on. The longer the experiment goes on the harder it gets, the more volatile his equity growth curve gets. But in theory if he sticks to his 2:1 RR and 50% bet sizing and he starts with: 8 winners in a row, he reaches the target after just 8 trades or a mix of 9 winners 1 loser (any order), he reaches the target after just 10 trades or a mix of 10 winners 2 losers (any order) he reaches the target after just 12 trades or a mix of 11 winners 3 losers (any order). he reaches the target after just 14 trades ... ... ... or a mix of 34 winners 26 losers, he reaches the target after 60 trades (win rate has dropped to 55% in this scenario, but its still possible to hit the target) But like I said above the longer the experiment goes on the harder it gets, the more volatile his equity growth curve gets. The market day session ending before his 2:1 target gets hit on some of his trades, also scuppers the theory listed above. And means it could require more than 8 net winners in practice.
It's harder to hold 500 or even 100 lot ES positions overnight. Need millions in overnight margin. But intraday you don't need much at all. Some brokers will let traders put on 100 ES lots with just $25K in margin as long as you don't trade over the big news events like FOMC or hold overnight. But just a 4 point adverse move in the ES will wipe out (auto liquidate) a $25K account that is holding a 100 lot position, so definitely not for pussies.
First of all, I want to wish you all a Merry Christmas! I wasn’t expecting to receive so many responses, and I truly appreciate all of your feedback and support. As previously explained, the risk will be higher in the beginning but will gradually decrease over time. I also manage other accounts with significantly higher capital, where my risk is much more limited. One of the main drawbacks of this strategy is the risk of consecutive drawdowns (about 5% probability), as well as the strong psychological demands faced during both losses and gains. Regarding the trend-following approach, it's a bit complex to explain. I use two different methods for the ES and NQ. I pay special attention to the first 30 minutes after the open on both indices, and I am particularly focused on the previous day’s opening and closing levels for the NQ. For the ES, key psychological levels and the overall trend are crucial for me. I would also like to remind you that the 2:1 R/R is an average, and I can very well exit with a 0.5:1 ratio, and the next day exit with a 4:1 ratio. On the NQ, I use less tight stop-losses compared to the ES, which lowers my average R/R, but my success rate is higher.
That’s already the case, and the same applies to the price. I always base my decisions on the underlying asset.