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2 Points per day from ES??
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2 Points per day from ES??

  #51 (permalink)
Fortitudo et Honor
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rtrade View Post
RM99, I'm a bit confused. On one hand your saying, "Of course it's possible..." and on the other you are saying, "Is it likely? No."

Which is it?

Remember the original post is from a single working mother, I believe...

Is it possible to win the lottery? Sure. Is it likely? No.

Like I said, it's not that difficult to develop a strategy that returns an average of 2% a day. But to do so, consistently with no drawdown is another matter.

So, when you examine the problem further, you see, that even if you "average" 2 points/day once you throw drawdown into the equation, it greatly reduces the % because you must carry drawdown reserve.

So if you're averaging 2 points a day and you have a maximum drawdown of one contract value (a pretty reasonable drawdown)....then your 2 points becomes 1% daily ($100/$10k). $10k because you have a $5k contract margin and $5k drawdown reserve.

So, 1% a day.

Compounded daily, that's 1227% annually. Do you know a lot of traders who can take their account from $10k to $122k in a year?

Not only that, but in order to yield 1% daily, (with the drawdown discussed) you'd have to be able to earn more than 2 points because you have to overcome slippage and commissions.

So I say again, is it possible? Sure. Is it likely? No. I would say it's not common.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #52 (permalink)
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RM99 View Post
Is it possible to win the lottery? Sure. Is it likely? No.

Like I said, it's not that difficult to develop a strategy that returns an average of 2% a day. But to do so, consistently with no drawdown is another matter.

So, when you examine the problem further, you see, that even if you "average" 2 points/day once you throw drawdown into the equation, it greatly reduces the % because you must carry drawdown reserve.

So if you're averaging 2 points a day and you have a maximum drawdown of one contract value (a pretty reasonable drawdown)....then your 2 points becomes 1% daily ($100/$10k). $10k because you have a $5k contract margin and $5k drawdown reserve.

So, 1% a day.

Compounded daily, that's 1227% annually. Do you know a lot of traders who can take their account from $10k to $122k in a year?

Not only that, but in order to yield 1% daily, (with the drawdown discussed) you'd have to be able to earn more than 2 points because you have to overcome slippage and commissions.

So I say again, is it possible? Sure. Is it likely? No. I would say it's not common.

It depends on who you are referring to. A new trader, I would agree with what you've said here. But for an experienced trader, 2 ES point per day is absolutely, definitely, 100% possible. An experienced trader will likely look to gain more per day so that his/her losses are far outweighed by their gains. It obviously comes down to simple number averages. You can't go in and make 2 points and close up shop every day. You will have losing days, that's just how it works. But if you have a good R:R and a high(er) winning percentage, you will exceed 2 points per day on average. 2 points in ES is one simple little move. If we were talking about 6 points per day in ES, then I would say that is a little more difficult. The draw to trading the ES for professional traders is mainly by necessity as no other markets provide the liquidity like ES does (except bonds). I can have a fill of 300 contracts no problem in ES where other markets would provide me with horrible slippage. So, the range doesn't need to be that big to make it worth while.

The thing to remember with futures trading is it's different than traditional stock investments. The leverage is enormous and most traders I know, including myself, take their weekly and/or monthly profits out of their accounts. This doesn't include swing trading by the way. I'm talking about your day-to-day trading account. So the idea of calculating 1,000% annual return doesn't really make sense. It's a different ball game here. We aren't running a hedge fund here. What do you think the guys in the pits are making? I know a guy who made a few million dollars in one week trading Crude which was out of the ordinary for him but it happens. Do you think he sits down and tries to figure out what his annual percentage returns are? I think many would be surprised by the amount of money some traders are making out there.

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  #53 (permalink)
Fortitudo et Honor
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Private Banker View Post
It depends on who you are referring to. A new trader, I would agree with what you've said here. But for an experienced trader, 2 ES point per day is absolutely, definitely, 100% possible. An experienced trader will likely look to gain more per day so that his/her losses are far outweighed by their gains. It obviously comes down to simple number averages. You can't go in and make 2 points and close up shop every day. You will have losing days, that's just how it works. But if you have a good R:R and a high(er) winning percentage, you will exceed 2 points per day on average. 2 points in ES is one simple little move. If we were talking about 6 points per day in ES, then I would say that is a little more difficult. The draw to trading the ES for professional traders is mainly by necessity as no other markets provide the liquidity like ES does (except bonds). I can have a fill of 300 contracts no problem in ES where other markets would provide me with horrible slippage. So, the range doesn't need to be that big to make it worth while.

The thing to remember with futures trading is it's different than traditional stock investments. The leverage is enormous and most traders I know, including myself, take their weekly and/or monthly profits out of their accounts. This doesn't include swing trading by the way. I'm talking about your day-to-day trading account. So the idea of calculating 1,000% annual return doesn't really make sense. It's a different ball game here. We aren't running a hedge fund here. What do you think the guys in the pits are making? I know a guy who made a few million dollars in one week trading Crude which was out of the ordinary for him but it happens. Do you think he sits down and tries to figure out what his annual percentage returns are? I think many would be surprised by the amount of money some traders are making out there.

Again, quoting any return without a time period or a drawdown is pretty misleading.

Every trader has positive trades outside of a couple standard deviations.

What are the results over the course of an entire year? What is the drawdown associated with those results.

When you combine those two issues, you'll quickly realize that chasing 2 points a day, although possible, is very difficult without a sizeable account.

Again, developing a strategy that makes money is very easy. Developing a strategy that makes A LOT of money isn't all that difficult. Doing EITHER with a low drawdown level becomes increasingly difficult, with every increment of overall profit.

So when someone says "x points" or "x ticks" per day, it's misleading. How big of an account does it take to execute that?

A $100k account that yields 10 ticks a day in oil is .1%/day. Compared to a $10k account that yields 10 ticks a day which is a 1%/day yield.

The difficulty between those two is pretty significant.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #54 (permalink)
Fortitudo et Honor
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What this thread is really about, fundamentally, is strategy development and the challenges associated with it. (or in the frame of the original question....what's "possible" or feasible).

Strategy development is like a 4 sided rubix pyramid.

Rate of Return
Time Period of Return
Drawdown
Complexity/Ease of execution (and challenges associated).

Solving one side or optimizing it, might have adverse effects on the other side(s).

The "holy grail" (I dislike that term btw) would be a strategy that had massive returns, over a LONG trading period, with zero drawdown and was very easy to execute (i.e. very simple, with very little complexities like limit orders, contract rollover dates, inter vs intra day trading, etc).

Most strategy developers can take just about ANY indicator or combination and craft a "profitable" strategy. But at what costs? What use is it to net $30k in profits over 6 months, if your strategy drawsdown twice that amount? What use is a strategy that cherry picks an optimal period in the market where it returns high yields, but does marginal or even negatively over longer time periods?

What you find is that it's insanely difficult to solve all four parameters.

I can't tell you how many strategies I've developed that potentially made money, but had unacceptible drawdown or did well over a certain time period, but failed during other timeframes or became impossibly complex to execute, etc.

Drawdown may be the most prolific aspect, because it not only affects the "true" rate of return (with respect to account size required) but also significantly affects the way you're able to compound through increasing positionsizes.

Most traders fail to recognize that a strategy that has half the return, but half the drawdown will actually yield considerably MORE profit once compounding is considered.

So when someone quotes "averaging 10 ticks a day" that's not a fair, transparent representation of how well the strategy actually compares. Because the account size to execute that, has a huge impact on what the real rate of return is.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #55 (permalink)
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RM99 View Post
Again, quoting any return without a time period or a drawdown is pretty misleading.

Every trader has positive trades outside of a couple standard deviations.

What are the results over the course of an entire year? What is the drawdown associated with those results.

When you combine those two issues, you'll quickly realize that chasing 2 points a day, although possible, is very difficult without a sizeable account.

Again, developing a strategy that makes money is very easy. Developing a strategy that makes A LOT of money isn't all that difficult. Doing EITHER with a low drawdown level becomes increasingly difficult, with every increment of overall profit.

So when someone says "x points" or "x ticks" per day, it's misleading. How big of an account does it take to execute that?

A $100k account that yields 10 ticks a day in oil is .1%/day. Compared to a $10k account that yields 10 ticks a day which is a 1%/day yield.

The difficulty between those two is pretty significant.

I always crack up at these types of debates. You're entitled to your own opinion and I'm not here to try and change your thoughts on this. The old "does anyone really make money trading argument".

From what I've experienced and witnessed throughout my career as a PM managing OPM as well as managing my own money and constantly speaking with other friend traders that this is 100% possible over a long period of time (years). Will you have a winning day every day? No. It comes down to having larger winning days to losing days. Sure account size plays a factor but I don't think that was a part of the original question to this thread. So I guess we have differing opinions which is fine.

Best of luck to you.
PB

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  #56 (permalink)
Fortitudo et Honor
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Private Banker View Post
I always crack up at these types of debates. You're entitled to your own opinion and I'm not here to try and change your thoughts on this. The old "does anyone really make money trading argument".

From what I've experienced and witnessed throughout my career as a PM managing OPM as well as managing my own money and constantly speaking with other friend traders that this is 100% possible over a long period of time (years). Will you have a winning day every day? No. It comes down to having larger winning days to losing days. Sure account size plays a factor but I don't think that was a part of the original question to this thread. So I guess we have differing opinions which is fine.

Best of luck to you.
PB

If you read my posts, I never said it was impossible. I'm simply trying to convey that possible <> likely or easy.

Is it possible for a 5'9" kid from South Dakota to make the NBA? Sure. Is it more likely for a 6'10 kid from North Carolina? Absolutely.

Telling someone...."oh sure, I know lots of guys who make more money than that" is misleading. If you read my original post, it has to be qualified with a number of things...experience...capitalization(account size), what type of risks are they undergoing and how long of a period are we talking about.

Averaging 2 points/day for 6 months is a horse of a different color compared to averaging 2 points a day for 3 years.

So my point was that it's pretty useless to discuss what's possible and impossible. It's more relevant and cogent to discuss what's likely and unlikely, what's difficult and what's easy.

Is it possible for a team of Jamaicans to win a title in bobsledding? Sure. Would I bet on it? No.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #57 (permalink)
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I find ES hard to make money on because of tight range. The liquidity is fantastic and I have always wanted to develop a strategy for the ES because the scale potential is awesome. But looks to me at least from a day trade perspective would have to be a scalping strategy which I have never tried to develop. Scalpers can do quite well but better have a good grip on what commissions will do to you or will get eaten alive. You might also consider CL if you want something with big range that you don't have to scalp.

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Last edited by liquidcci; July 17th, 2011 at 05:24 PM.
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  #58 (permalink)
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RM99 View Post
If you read my posts, I never said it was impossible. I'm simply trying to convey that possible <> likely or easy.

Is it possible for a 5'9" kid from South Dakota to make the NBA? Sure. Is it more likely for a 6'10 kid from North Carolina? Absolutely.

Telling someone...."oh sure, I know lots of guys who make more money than that" is misleading. If you read my original post, it has to be qualified with a number of things...experience...capitalization(account size), what type of risks are they undergoing and how long of a period are we talking about.

Averaging 2 points/day for 6 months is a horse of a different color compared to averaging 2 points a day for 3 years.

So my point was that it's pretty useless to discuss what's possible and impossible. It's more relevant and cogent to discuss what's likely and unlikely, what's difficult and what's easy.

Is it possible for a team of Jamaicans to win a title in bobsledding? Sure. Would I bet on it? No.

This is silly. I've got nothing against your opinions and apologize for misinterpreting what you've previously said. My comments were purely anecdotal with reference to professional traders. You are entitled to whatever it is your thoughts are. I just wanted to add a different point of view on this. Besides, I'm not one for arguing with people I don't know on the internet, lol!

Have a good one.

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  #59 (permalink)
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RM99 View Post
Averaging 2 points/day for 6 months is a horse of a different color compared to averaging 2 points a day for 3 years.

With due respect...NO absolutely not....if the trader has succeeded in averaging 2 points per day for 6 months it is, in my opinion, reasonable to realize a similar result over a 3 year period provided the strategy and trade management in robust enough to counter any significant behavioral changes in the ES market.

If the trader was successful over the 6 month period to realize those results it has to be reasonable to assume the trader has good discipline and controls...and good luck to them!!

Trader

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  #60 (permalink)
Fortitudo et Honor
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Private Banker View Post
This is silly. I've got nothing against your opinions and apologize for misinterpreting what you've previously said. My comments were purely anecdotal with reference to professional traders. You are entitled to whatever it is your thoughts are. I just wanted to add a different point of view on this. Besides, I'm not one for arguing with people I don't know on the internet, lol!

Have a good one.

You're right. I give up. It's possible. Nothing more necessary or relevant.

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