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NinjaTrader's backtesting is not accurate enough to truly answer this question, but using it in combination with some stuff I've written lets me get rough ideas. For fun I changed it to 1 unit after a loss, and 2 after a win. Over 1 million iterations, the results are about the same. I've decided that I will do one unit per X dollars in the account, making it somewhat dynamic. Of course, now I have to find a good way to determine X.
Thanks for the input.
Can you help answer these questions from other members on NexusFi?
Option Side: Continue to stay on the sidelines. Continue to be happy with that decision.
Day Trade Side: Had family in town today. I knew I would not be able to monitor the trade throughout the day. That made the 1-unit or 2-unit question quite irrelevant. It was a 1-unit day. I even gave some consideration to using just 1/2 unit since I'd be away from the screen. But I finally reminded myself that the market can carry on without me watching it, so I went with 1 unit. The part I didn't like was the inability to stop the trade out if it went bad. IB claims you can enter spreads as a combination order, but I have never been able to get it to work, so no stop today. Therefore I have no idea how much the trade was up or down throughout the day. I do know that it was up 2700 when I got home around 3:20. I closed half immediately and then the rest at 3:45, finishing +3107 for the day. Which means, truthfully, I did better than I most likely would have had I been home all day. Hmmm, maybe something to think about there...
So a really good day even though I only worked a few hours getting the trades initiated and about 1/2 hour on the exit. Exact numbers in the morning.
Option Side: Still on the sidelines. VIX down 18% as I type this. Is it safe to get back in the water? I'd rather be late than too early. Nothing done today.
Day Trade Side: Not too much excitement today. Decided to do 1 1/2 units today to see how that felt. It was OK. Trade worked fairly well after a sluggish start. I got up 1600 and decided to cut 1/2 my position. I did a horrible job on the exit (about $200. in slippage) and the trade petered out from there. At one point it had dropped back to only about +600. Then it recovered late and I exited +1074.
Exact numbers in the morning.
I do like that when I am done for the day, and no options, that I am completely flat and can fill out this journal early. Nice.
Option Side: It appears that we are not going to be faced with an all-out panic. VIX shrunk a little more today. That being said, we still had a ~65 point range today in ES. I'll stay on the sidelines a bit longer.
Day Trade Side: A very poor job by the trader today. Trade worked well early and reached +1000 in fairly quick order. I will often lighten up at that level, but I hadn't even gotten my 3rd leg on at the time, and I really hate to make any adjustments whatsoever, for better or for worse, until at least 30 minutes after the initiation of the 3rd leg. So I held on. After I did get the 3rd leg on, I was up about 600. Then it dropped to +400. OK, let's add a 1/2 unit right? Especially since my position sizing algorithm had me fairly small in unit size due to recent volatility. Oops, that didn't work. Close the 1/2 unit at a loss. Trade starts working again. OK, now must be the time to add the 1/2 unit, right? Wrong again. This time I was short the Dow and it looked as if it had no intention of slowing down, so I just bailed. Got lucky really to finish +124, but a disappointing day as I gave a lot away with some poor decisions and bad timing. Intuitively it seems as if it would make sense to trade 1 unit, and add judiciously when opportunity presents, but I could be all wet. Perhaps it's best to determine, pre-game, if we are trading 1 unit or 2 (or 1.5) and just stick with that all day. What would a professional do? Well, that's what I need to figure out. As always, the credo is "Trade Like A Professional".
As expressed in an earlier post, I believe that position sizing shouldn't be changed intraday.
See above, regardless of the result.
Why, when you are already doing 3 legs?
My opinion, FWIW, as well.
Don't be too harsh on yourself. It's difficult watching a 4-digit profit slowly evaporate into 3 digits. It's also difficult allowing a 3-digit profit the room to grow into a 4-digit profit. Both come with the territory and your performance to date is something that everyone can be envious of.
To clarify, I don't add a 4th leg when I add. I increase the size of what I already have on. Say, for example, the unit size for MNQ today is 4, and I am long. Adding a 1/2 unit would mean buying two more (and selling the appropriate amount of the other side of the spread), not finding another trade.
As for adding, or subtracting, from the position intraday, there's no doubt in my mind that doing so can increase profitability if done correctly. Even as a spread, the trade tends to have a life of its own. It chops, it trends, it stagnates. The question is, can I read the action well enough to manipulate the trade, or am I better off simply letting the chips fall where they may?
Another factor is making use of capital. Normally the option portion eats up a large percentage of my available margin. But right now I am completely out of options so my margin requirement is literally zero at the start of the day. Am I making the best use of what I have to work with? With intraday margins I could probably do 10 units if I wanted to, but the losses on a bad day would be much greater than I care to take. So it's about striking the best balance between maximizing profitability vs. controlling the losses.
As for being hard on myself, I absolutely am. It's hard enough to trade without the trader screwing things up. I demand perfection from myself. Of course I don't get it, and intellectually I realize it's not possible, but it still frustrates me. I have a FitBit and most days I get my 10,000 steps by walking around my back porch and asking myself, repeatedly, "Are you trading like a professional today? If the best trader in the world walked in right now, would he/she say 'Looks good', or would he/she exit or make adjustments? What would a professional trader do, and are you doing that?". For me it's all about taming the competitive beast inside me, and doing the right thing. Over and over again.
At the end of the day I chronicle my thoughts on how the day went down. Some of that here. My "heat of the moment" thoughts on how the day went, how I handled it, the swings up and down. I think it will be good to look back on at some point, and will perhaps even lead to better trading. But that's it. There's no carryover. No matter what happened yesterday, I am good to go the next day. I may beat myself up at times, but it never lingers.
Option Side: Ho-hum. Another ~70 point range in ES. VIX is cratering, but I'm still out.
Day Trade Side: A nothing day. Did 1 unit. Was down most of the day, but not a lot. Got into the green around 3:40ish and bailed. Finished +218 on the day. Not much more than yesterday, but so much calmer. Yesterday IB made more than I did, but not so today. This was the day to be a trend trader as opposed to a spread trader. Oh, well, a win is a win. I'll take it.
