My stops typically range from 3-6 points depending on range of entry pivot. First target is the lesser of a four tick front run of prior high or low or 10 points, runners could be a bit more or many points more. In lesser volatility, the 10 points would be reduced but so would naturally initial risk. We can only make what the market is willing to give us.
these discount shops have their place let me put it this way: some folks wouldn’t be able to do what they do without the low margins and low fees these guys offer others get cooked it’s a tool. if you know how to use it you can build a palace with it. if you don’t know how to use it you can hurt yourself.
Understood. I, too, have a plan that targets 4 to 10 points (depending on what the market gives, as you put it). Seeing max loss is $500 per contract, of course, I wouldn't trade with an account that only had $500 (just for the initial margin), but having 16x more in cash than the margin seems like "overkill" safety net. But, I understand what you are saying . . . that's what makes *you* feel comfortable.
I guess, asked another way, have you ever had a situation where--during your 20 minute trades (I'm assuming)--that you've been so "pummeled" by the market, that you needed even 3x, 4x, or 5x (let alone 16x) amount of cash capital in your account vs. the positions you held (i.e. before--or even by time--you closed out the position)? I've done quite a bit of paper trading, but perhaps not consistent enough to understand an experience that led to a need for *extensive* multiple times more cash vs. position margin needed for that position. Can you share any first hand experiences where the need for 16x cash vs. margin for the position was required and/or saved you from "certain doom?"
It's not a matter of need. At the level of margin I do use, I really don't care if the next trade or the one after or the one after that fails. Once you have learned how to read price action and have formulated and tested a robust trade plan AND can trade with the disciplines required, there should be no reason for being pummeled. The only time I've been pummeled was before I did what was required to trade profitably as a professional trader.
Makes perfect sense. Learning to crawl before walking (let alone running, eh). Well, I'm in a position to invest real money after spending QUITE some time getting used to the controls, the market, my instincts, my emotions, and profitable experiences on paper. But, I hear what you are saying. In fact, this is why my first endeavor will be the MICRO e-mini. Getting "pummeled" there will hurt a lot less (not that my plan includes getting "pummeled" -- LOL). Thanks again for your advice and wisdom!
The micro is a fine training vehicle regardless of account size or net worth. The commissions are disproportionate but a developing trader should prove profitability before that should be an issue.
The amount needed to daytrade ES or NQ (for example) is daytrade margin required by broker and amount of maximum drawdown of your system (maybe multiplied by 2). So if my system has maximum drawdown 800-1000 for one contract - I will count it as 2000. Then I can add broker margin requirement and that is. For AMP I need 400 (ES) + 2000 = 2400, for Tradestation I need 6600 (50% of initial) + 2000 = 8600. With 8600 dollars you can daytrade one contract with Tradestation or 3 contracts at AMP. But you have to have reliable and backtested system and follow the rules to avoid higher drawdown. You do not need 10000 or even more for one e-mini contract.