Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
From my experience if you intend to make a living Day Trading you need size. Anyone saying otherwise is perhaps not thinking from the viewpoint of making a living off your trades. Whether your strategy is a long-term hold, or short term, you need size to trade to mitigate the risk.
The reality is no one “knows” whether a market is going to go up or down. So, your success will be a matter of probability. You can become very experienced, but the markets reflect people’s thoughts, hopes and fears. And we cannot master those any more than we can master the markets.
In order to prevent blowing up, you may decide to risk 1% of your account, with an aim of making a 2% profit. This is all fine, but 2% of a 1k account isn’t going to change your world. You will be relying on larger market moves which are riskier.
Where a lot of things go wrong, is that people with small accounts will overuse the leverage to achieve a bigger gain. The thought process being “Well, I only need to be right in 50% of my trades”. This exposes them to draw down risk and blow out.
When you trade, you are making a business transaction. Your 2% risk(profit) target needs to pay for the software license fees, broker fees, exchange fees, spreads, and your time – the costs of business.
Your trading account shouldn’t be the same account you eat from, so again not only is the size of the account important, but you need to be in a position to ensure you don’t need to constantly withdraw from it.
Hedge funds make money from their fees – which they charge whether they generate return or not. Day Traders don’t necessarily have that luxury – Day Traders need to be profitable to eat. And that profit needs to be a meal worth coming to the table for.
With a larger account, you can plan your trades to hit your 2% target (or whatever target you may have) without having to rely on large directional moves.
This is a good summary of a major issue many traders run into: too small an account, and its cousin, too much leverage.
The problem of course is that you only have the money available for trading that you have, and many brokers, who know this, will allow trading from accounts with very small margins.
What to do? Some options:
a) Get more money. (I know, easier said than done. But not impossible with saving and patience. Just don't borrow any. I hope I didn't have to say that. )
b) Or, stay in sim while doing a).
c) Or, trade the micros, but still keep your exposure small and don't go insane with leverage. And keep doing a),
The advantage of c) is that you get some real-world experience that involves actual money, and your exposure will still be small. Traders new to live trading should realize that they will, almost inevitably, lose some or all of it, so take that as a cost of learning and always keep your exposure small relative to your account size. The disadvantage is that you still won't have much money you're trading with.... See option a), which you can pursue along with this one.
And give up the dreams of instant wealth. Gradual progress is what will win in the end.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I speak as a newbie -- 6 months in. I avoid sim for one main reason --
emotions --
Everything else to me is secondary. Even my losses -- yes, I have major drawdowns ( expected as I am learning my craft -- mcl market only for now). Greed, gambling, revenge trading -- etc come up every day as does fear. I have to learn to overcome these NOW and during my learning to be in the black. Also, to me sim is not the real thing as no emotions come up and I feel like a fraud for doing it.
Say I make ten ticks a day doing sim, my goal right now for the next 6 months. At the end of 6 months on live, I will do or not do -- but it will be real. Sim, trying that I believe deeply if I do that, at the end of 6 months -- it will be a waste of time. Kinda like shadow boxing and then going into a real fight at the end of 6 months. The reverse is also true, there are days with many ticks gained and I need to also work on those emotions that can turn winning days quickly to days we cannot redo. Everything I have read and been studying leads me to a conviction that emotional control is the greatest edge we have. That I work on every day. Sim does not offer feelings of a position be it good or bad.
I recommend paper trading until you have fully developed the following components of a trading plan:
1. You have defined and can recognize the SETUPS you intend to trade (example: break of significant support or resistance or trend reversal breakout...I have specifically defined 4 setups)
2. You have defined and can evaluate the CRITERIA which must be present in the market to take a given SETUP (example: 30 minute momentum in the direction of trade or confirmed trend on timeframe you are trading, I have specifically defined 5 criteria)
3. You have tracked and quantified the PROBABILITY of each SETUP being successful (I tracked 6,000+ paper trades over 9 months...I trade setups which typically yield 10-30 ticks in GC, CL and ES with a stop loss at 10 ticks and a win % of 60%-70%)
Once you are comfortable with your setups, criteria and probability model...then you can BEGIN TRADING REAL MONEY and testing your resolve/trust in your model.
Start small...even if you have a large account. I recommend trading the micros...first 1 micro, then 2, then 3. I started with only the MGC and MES micros, but now there is the MCL micro as well.
Once you can consistently yield 100-200 NET ticks of profit on a daily basis with the micros...then you can move on to the larger contracts. I found that the performance of the markets I traded live was pretty much the same as paper trading with the caveat that you do get slipped
a tick or two at entry or exit when live. I also found the micros to perform about the same as the minis when live, again some minor slippage of a tick or two usually with GC/MGC...not so much with ES/MES.
The biggest difference between live and paper trading is your confidence and steadfast willingness to take the setups with the right criteria that you developed in your probability model. Even this takes some time after you begin live trading, but eventually as you see
your model performing...you will get to a point where the risk you are taking (in my case 10 ticks) is just a tool for getting into the game. You will lose that 10 ticks a few times every day, but if your setups/criteria have a high winning %(60%-70%) and a reasonable risk/profit ration (mine is 1/1.7)you will be profitable.
@redbarntrades: Your comment brings out the need to add a 4th criteria for when to stop paper trading. Number 4 would be:
4. You have successfully yielded 100+ Net Ticks on a daily bases in SIM mode, for a consistent period of time...ie 60 days. You will likely find that you will need to develop a mindset that drives you to take
setups that meet your criteria whenever they appear...without hesitation...as your probability model will work in your favor. There are certain times of the trading day where you might skip a setup because volume
just isn't sufficient...but generally between 8:00am EST - 11:30am EST and 2:00pm EST - 4:00pm EST, there is sufficient movement to propel your setups in the right direction given your criteria is met.
Number 4 is good/great. Obviously, one can adjust, improve, alter and refine their own rules as we all seem to do.
I appreciate your format which offers good value.
Too bad you live so far away. My trader wife and I would loved to sit down and have lunch/coffee with you.
We have not crossed paths with any traders out here except for a stock swing trader. We don't know any futures traders. At least we have each other to dialogue with!
I'm glad you posted your info as it just reaffirms our own thinking on the subject.
I recommend paper trading until you have fully developed the following components of a trading plan:
1. You have defined and can recognize the SETUPS you intend to trade (example: break of significant support/resistance or trend reversal breakout...I have specifically defined 4 setups)
2. You have defined and can evaluate the CRITERIA which must be present in the market to take a given SETUP (example: 30 minute momentum in the direction of trade or confirmed trend on timeframe you are trading, I have specifically defined 5 criteria)
3. You have tracked and quantified the PROBABILITY of each SETUP being successful (I tracked 6,000+ paper trades over 9 months...I trade setups which typically yield 10-30 ticks in GC, CL and ES with a stop loss at 10 ticks and a win % of 60%-70%)
4. You have successfully yielded 100+ Net Ticks on a daily bases in SIM mode, for a consistent period of time...ie 60 days. You will likely find that you will need to develop a mindset that drives you to take
setups that meet your criteria whenever they appear...without hesitation...as your probability model will work in your favor. There are certain times of the trading day where you might skip a setup because volume
just isn't sufficient...but generally between 8:00am EST - 11:30am EST and 2:00pm EST - 4:00pm EST, there is sufficient movement to propel your setups in the right direction given your criteria is met.
5. Once you are comfortable with your setups, criteria and probability model...while trading in SIM, then you can BEGIN TRADING REAL MONEY and testing your resolve/trust in your model.
Start small...even if you have a large account. I recommend trading the micros...first 1 micro, then 2, then 3. I started with only the MGC and MES micros, but now there is the MCL micro as well.
Once you can consistently yield 100-200 NET ticks of profit on a daily basis with the micros...then you can move on to the larger contracts..in my case ES,GC & CL. I found that the performance of the markets I traded live was pretty much the same as SIM trading with the caveat that you do get slipped
a tick or two at entry or exit when trading live. I also found the micros to perform about the same as the minis when live, again some minor slippage of a tick or two usually with GC/MGC...not so much with ES/MES.
The biggest difference between live and paper trading is your confidence and steadfast willingness to take the setups with the right criteria that you developed in your probability model. Even this takes some time after you begin live trading, but eventually as you see
your model performing...you will get to a point where the risk you are taking (in my case 10 ticks) is just a tool for getting into the game. You will lose that 10 ticks a few times every day, but if your setups/criteria have a high winning %(60%-70%) and a reasonable risk/profit ratio (mine is 1/1.7)you will be profitable.
Lots of complicated answers to a very simple question.
The simple answer is to stop SIM trading when you have achieved CP (consistent profitability) with an acceptable draw down. Those two conditions are it.
)