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They say no question is a dumb question....I have a Buy / Sell question.
I don't want to weaken your motivation/fuel, but I don't doubt YOU. You have made a few posts and seem to be very nice, intelligent, humble, and analytical. So, I'm sure you'll do fine. But, if it helps you to think of me as a hater, and it drives you, then I'm happy to serve as your doubting muse, even though I'm not.
What I do doubt is the attitude of "this seems easy, just make $1k a day using a small target and large risk" ... any strategy which relies on an 88% win percentage to break even is something I would doubt being successful in the long term. I've just heard this so many times over the years, hence the popcorn (which I like with some butter!).
FWIW, for every successful athlete you hear about being motivated by doubters, there are 100 others who were motivated by doubters who failed. Motivation stemming from something negative like that is probably not sustainable, so I might suggest you continue to derive your motivation from other more positive things which I'm sure you already have! Cheers and welcome.
Probably I have not understood exactly what you are doing, but from my perspective, there is nothing wrong in your system, as long as you backtest your strategy and get a positive result of its performance and parameters both in present days and when ES was at minimum volatility levels.
So my suggestion or better say my approach would be to write a trading system and just run it on 15-20 years of data. From a mathematical point of view, instead of considering different accounts to be blown, you can simply consider a catastrophic stop loss of 1.000$, or 2.000$...
And I would not fit/overfit the system. Just run it as you conceived it now.
And see how it goes. All the rest is just theoretical speculation about something that we don't know fully.
One parameter that I might want to consider, though, (but only after you have visually/manually decided that it's really worth consideration) is an indicator linked with the volatility of the underlying. I mean, let's suppose for example that you find out that the catastrophic stop loss happens in situations when volatility abruptly increases. In this case you might want to exit the trade before reaching the stop loss. Or maybe it's the opposit, that the account is usually blown when the underlying slowly falls and the increase in volatility actually helps you to reached the target.
Just as a thought experiment, you don't realize losses until you sell. So I suppose if you have enough account balance to trade 1 contract without margin, then you can never be forced to sell. So OP's strategy could theoretically work if you trade without stop losses. Wouldn't you in theory be able to hold the losing position forever if you bought with your own cash?
With this strategy, you'd typically hit your small profit target same day or within the week. For a losing position that takes longer to recover, you'd then be comparing the $ profit from the small target to some interest rate you could easily earn if that cash were invested else where. Perhaps against an online savings account rate (I believe Amex is still over 1%).
Some very dirty math:
$300,000 to trade 1 ES contract without margin
$300,000 x 1% = $3000 annual interest
$3000 / 365 = $8.2 interest per day
8 tick profit target = $100 profit
$100 / $8.2 = 12 calendar days
So basically as long as your position hits the 8 tick profit target within 2 weeks, you're okay.
Then again if you have $300k ready to risk and are already actively day trading, then perhaps using the funds for something else such as option selling could get you a much higher return (30%).
First, I think it's great that people are even thinking of ideas like this. It's not new or novel, but it's at least different than what most people are thinking about, so kudos for that. In fact, it's essentially a poor man's Martingale strategy.
FWIW, with $158,250 you can buy 1 ES and ride it to zero. Also, I'd think that in current market regimes (and for the past 10 years or so) you'd basically be a long-only trader.
The frequency of winners (in this case, since you never lose, we can't use win rate) will determine the feasibility of the strategy. And while long periods of drawdown aren't extremely likely, all it takes is one such period to sideline you for months. Unless perhaps you had a rule that stated you could add a contract lower and continue with the strategy (a bit of Martingale). What is the probability of an extended period where you are unlucky enough to not get 8 ticks and the market moves straight past you and keeps going? This depends heavily on the entry but even with a low probability of this happening, it will happen, statistically (buying late Feb at the wrong time would have been pretty disastrous).
"Why doesn't everyone do this?" Because those who try it get wiped out?
This is one of those strategies that look good on paper to new traders.
You are accepting an 80 tick loss if you're wrong, in exchange for a 5 or 10 tick gain if you're right. Basically, you have to almost always be right.
I think it's amazing that you think that "Based on the support and resistance and the MA-14-20-40-200 and the volume all give clear indications the market is going to go up at least 10-20 ticks in the next 4 hours." Really? You think you can count on this? Consistently? Over a span of time? With these kind of risk/reward numbers?
Try it if you like. Only risk money you are willing to lose.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
