A) I tend to go short in overbought / overextended ranges on a 1500 tick. If I see the same on a 4500 tick charts I'll trade more contracts. I know many scalpers look at far smaller/shorter timeframes so I do have confidence that I could increase position size without much concern.
B) My funds are held with Interactive Brokers. They're a public company, have been around longer than many, and have a good reputation among the professional group. I'm sure the same or similar could be said about Lehman. Nevertheless, I'm not concerned about this factor. (If I should be I'd appreciate some insight).
C) I suppose that's the core of my question. I do have a full-time job in San Francisco (tech / funded startup with solid revenue and an actual business model). I live almost entirely from that source of income. I enjoy living nice and doing fun things ($8k/month unit with 2 friends, new Audi, nice food, etc) but I don't unnecessarily spend money on, for lack of better word, crap. I appreciated the response from @Tymbeline. I think his(?) model makes sense - withdraw 2/3 and leave 1/3 to grow the account. This secures income in savings account and offers opportunity to increase position sizes for increased profit potentials.
The following user says Thank You to TheBouncyTrader for this post:
If I were you, I would sweep as much of your profits as possible weekly. Once you have it out, you can decide what to do with it. Spend, save or buy a T-bills that you can use as security for more margin if you want to increase your trade size.
If you have losses, don't replenish the account. Reduce size and trade your way back up to the normal account size.
Last edited by Hickock; February 15th, 2016 at 07:40 PM.
Also, since you are with IB, you can learn to swing trade. Once you are comfortable with swing trading you can use the excess margin to place swing trades using SPY or another ETF and start compounding your returns with less risk than holding ES overnight.
For the ES, obviouly if you're only currently trading up to 10 contracts, you could easily scale up that strategy to possibly 50 contracts with enough liquidity during normal cash hours. But could it sustain 500 contracts? Do you even want to risk that type of capital allocation? (At some point, there is are some psychological growing pains to go through to be mentally comfortable with losing $125 per tick versus $625 per tick.
Interactive Brokers is in my opinion one of the best brokers currently. But they do run a proprietary desk (un-commingled), and rogue traders have been known to affect the best firms. None of the firms that went under were thought to be at risk of solvency issues until it came out of the blue. However, how large the account is needed is a purely mathematical question. If for example let's say max overnight margin needed is $5k, your average draw down is 1%, and you start feeling that say 30 contracts is starting to feel a bit top heavy, then you can start to calculate exactly how much you need in your account at any time, and how much you could just be holding in FDIC secured accounts for example. It would be a shame to have one black swan wipe out decades worth of work. That might make some sense if you're 75% deployed on capital every day, and just silly if you're only deploying 10% of your capital.
Alternatively, if you wanted to step it up to 50 contracts because you don't see any issues with your model changing with size, then you can keep stepping up the scaling. I can tell you for sure that if you try to trade London hours with 25 contract blocks and stops about 8 ticks away that is held on the book and therefore seen on any liquidity scanners, the predatory firms will for sure hunt your stops the moment the market quiets down. It's simply too much free money not to. So then if you changed your risk to say 16 ticks away, does your risk management model still work?
Anyways, sounds like you're in a great position. I'm sure sure whatever you decide works best for you will be prudent. Best of luck in your endeavors to grow your pot of gold!