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Expectations vs Reality: Trading Profitability


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Expectations vs Reality: Trading Profitability

  #21 (permalink)
 
xplorer's Avatar
 xplorer 
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wldman View Post
Does that answer?

It does. Thank you.

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  #22 (permalink)
 
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 wldman 
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@Tiberius

As a generalization I sell weekly 30 delta puts on stocks that I'd be happy to own. Those short puts are sometimes part of a long put spread and all the option deltas are in the consideration of "neutral"

Sometimes I have to roll the puts but most of the time they expire. Again, generally speaking you want to sell puts (long delta) when people are scrambling to buy insurance. Vola is exploding. Puts are bid up. This is fairly complex...meaning sometimes difficult...but like any insurance underwriter, the metrics for evaluation are there.

On that strategy that you described. Trying to sound humble...I do not usually marry puts at the time of purchase. Rather i try to convince myself that I'm buying long stock at a good price and owning for a very long time. I put all of my dividends on reinvestment and consider heavily 5 yr div growth rates and payout ratio, among other items when looking at stocks to own.

I will add protection by owing a long put, but most of my long puts are SPY puts. I buy those if I need a known downside for my short exposure...unfortunatly that element is something I have NOT mastered.

Maybe the right place is one of the Es threads if guys want to have a discussion.

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  #23 (permalink)
 
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 wldman 
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@Tiberius

Short the ES for as long as it takes. That is never the goal to have a short Es position for weeks, but it happens. I'm short a few more than I like from net 2917 right now.

The ES position does not have to be static. I do trade that both sides intra day if I think there is a good set up. Sometimes I improve my position, sometimes I screw it up, but if I'm neutral I have a theoretical basis for any outcome.

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  #24 (permalink)
 
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 Tiberius 
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wldman View Post
@Tiberius

Short the ES for as long as it takes. That is never the goal to have a short Es position for weeks, but it happens. I'm short a few more than I like from net 2917 right now.

The ES position does not have to be static. I do trade that both sides intra day if I think there is a good set up. Sometimes I improve my position, sometimes I screw it up, but if I'm neutral I have a theoretical basis for any outcome.

@wldman Your two above posts are understood and very helpful.

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  #25 (permalink)
 
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 wldman 
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it might help to say that a position does not have to be static/dynamic or binary to make money. Maybe it is appropriate to say that what I am describing is the ES trade as an element of a bigger picture. Are most members thinking of ES as an intra-day long or short... in an exclusive way. Meaning, I trade the ES for directional moves while the market is open (RTH)?

My question would be, that's cool, but why are you making time the enemy?

A legitimate, but in my opinion, unfortunate answer is that margin/deposit wont allow carry. Day trading the most competitive market in the world is, perhaps, the most difficult vocation on the planet.

It can be done, for sure...but I do not think that I could have done it on my best days, much less for a career.

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  #26 (permalink)
 
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 wldman 
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on that issue. You could pick any stock to be long. Then you could trade the /MES against it delta neutral. See, that calculation is Beta weighted. I should have included that all along. Now, a stock that is an element of the index, especially one that is a significant percent of the index, that is less that 290 ish per share does make the deposit required more tenable.

You can illustrate this manually peg a stock purchase and then the sell of a future against it. At the end of the day check the closing prices relative to the peg (trade price). You will see that most of the time the relationship is reliable...not always, but over time. Then if you look at the price action of both during the day you will see in the divergence and convergence of the two areas where you could have taken a leg.

I know that sounds complicated, but its not once you have a handle on it.

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  #27 (permalink)
 
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 sstheo 
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What a timely poll. Only on FIO can futures traders openly discuss the disparity between the REALITY of their trading (mis)adventures compared the the EXPECTATIONS without having to be anonymous! I love this site.

I have been trying for over a decade to trade one (just 1) contract of YM or NQ on a $1,500 or $2,000 account. And the market seems to know exactly when I enter every trade, as if to say "Steve is back! Let's show him AGAIN what an idiot he is!" And "When will he learn that 4 losses in a row of $150 wipes out half his account?" And "Major Loser!!"

For the past 3 years I have been dealing with this "Undercapitalized!!!" issue by trying out TST, OneUp, and LeeLoo. And I succeeded. I have been funded by MES capital after passing the OneUp trial 4 times now, and I am FINALLY being profitable. I have an account now that will allow me to trade multiple Emini contracts with a large enough draw down to make it through some bad trades. It has made ALL THE DIFFERENCE in my stress level and ability to be profitable.

Because of my success, I have been recommending the "Funded Trader" route to my friends, with the caveat that they better be able to win on a sim account 5 days in a row FIRST. These evaluations are NOT a practice field, but a money sink if you are not prepared to follow all the rules and do it right the first time. (You can review my FIO OneUp/MES journal here.)

Now something amazing happened last month. I have been hoping for micro indicies for a long time, and they finally arrived! I have since been toying around with the MES, MNQ and MYM. They are 1/10 the size of the Emini's. This doesn't mean that I don't make bad trades, it just means I don't die as fast. Because the commission is twice as costly as the Emini's per unit of gain ($.80 micro vs $4.00 Emini) I readily admit these are only to get someone started. But it is still exciting.

And now I tell people to avoid the combines all together and just open a $2,000 account and trade one (just 1) micro position at a time to start. That is like a $20k Emini account! According to a 2015 survey the average trader spent $1,145 on TopStep Trader. I now say FORGET TST, OneUP, LeeLoo, Earn2Trade, and all the rest. So put the combine money into your own account! And away we go.

Now trade the Micros. And watch in amazement as you patiently grow your war chest. Try to make just $20 per day to start on your $2000 account. That is 1% per day. Add one micro contract with each $300 you make. At 1% per day, you will have $24,000 at the end of 250 trading days. Once your account reaches $5,000, then switch over to the Emini's. Keep going at 1% per day using one Emini contract. This is just a $50 gain. Then add another contract with each $5,000 to $10,000 in your account. At the end of one year you will be trading with 1 to 4 contracts and conservatively making $238 per day. You will have $24,000.

You can keep scaling to your comfort level during the second year. At 1% per day, at the end of 500 trading days, you would be making over $2,500 per day and have over $250,000 in your account.

I think the Eminis are awesome and should help a lot of people bring their Realities closer to their Expectations.

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  #28 (permalink)
 tr8d3r 
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sstheo View Post
What a timely poll. Only on FIO can futures traders openly discuss the disparity between the REALITY of their trading (mis)adventures compared the the EXPECTATIONS without having to be anonymous! I love this site.

I have been trying for over a decade to trade one (just 1) contract of YM or NQ on a $1,500 or $2,000 account. And the market seems to know exactly when I enter every trade, as if to say "Steve is back! Let's show him AGAIN what an idiot he is!" And "When will he learn that 4 losses in a row of $150 wipes out half his account?" And "Major Loser!!"

For the past 3 years I have been dealing with this "Undercapitalized!!!" issue by trying out TST, OneUp, and LeeLoo. And I succeeded. I have been funded by MES capital after passing the OneUp trial 4 times now, and I am FINALLY being profitable. I have an account now that will allow me to trade multiple Emini contracts with a large enough draw down to make it through some bad trades. It has made ALL THE DIFFERENCE in my stress level and ability to be profitable.

Because of my success, I have been recommending the "Funded Trader" route to my friends, with the caveat that they better be able to win on a sim account 5 days in a row FIRST. These evaluations are NOT a practice field, but a money sink if you are not prepared to follow all the rules and do it right the first time. (You can review my FIO OneUp/MES journal here.)

Now something amazing happened last month. I have been hoping for micro indicies for a long time, and they finally arrived! I have since been toying around with the MES, MNQ and MYM. They are 1/10 the size of the Emini's. This doesn't mean that I don't make bad trades, it just means I don't die as fast. Because the commission is twice as costly as the Emini's per unit of gain ($.80 micro vs $4.00 Emini) I readily admit these are only to get someone started. But it is still exciting.

And now I tell people to avoid the combines all together and just open a $2,000 account and trade one (just 1) micro position at a time to start. That is like a $20k Emini account! According to a 2015 survey the average trader spent $1,145 on TopStep Trader. I now say FORGET TST, OneUP, LeeLoo, Earn2Trade, and all the rest. So put the combine money into your own account! And away we go.

Now trade the Micros. And watch in amazement as you patiently grow your war chest. Try to make just $20 per day to start on your $2000 account. That is 1% per day. Add one micro contract with each $300 you make. At 1% per day, you will have $24,000 at the end of 250 trading days. Once your account reaches $5,000, then switch over to the Emini's. Keep going at 1% per day using one Emini contract. This is just a $50 gain. Then add another contract with each $5,000 to $10,000 in your account. At the end of one year you will be trading with 1 to 4 contracts and conservatively making $238 per day. You will have $24,000.

You can keep scaling to your comfort level during the second year. At 1% per day, at the end of 500 trading days, you would be making over $2,500 per day and have over $250,000 in your account.

I think the Eminis are awesome and should help a lot of people bring their Realities closer to their Expectations.


Hey Steve, It is a wise approach you are offering. Let's have a look at it from the point of view who just came to that field and thinking he is going to make $1500 in 1 hours as there are many videos stating on youtube. When we are coming to trading we are seeing that we can get reach quick. At least this is what i thought when i join the club.
Most of us didn't realised that it is a marathon and not a sprint.
What you wrote above is already a plan for 1 year plus. Who wants to do it? When ppl wants to have it here and now.

At the end of the day the sooner trader realise that it is a Marathon and not a sprint the quicker he will progress.

With a micros now it is a truly a best approach to get your foot wet.

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  #29 (permalink)
 
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 snax 
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wldman View Post
there is a name for people that keep talking after nobody is listening and I don't want to ever be called, "candidate". I'm not sure where this will go but I do recognize that most people are interested in comparing themselves to others. I do not think that is productive. Compare you to yourself.

Please take the P/L scoreboard off of your screens. Trade price action or whatever method you use or are developing. Consider the results after the game (trade) is over. When the game is on, separate victory from profits and focus on victory. It might sound dumb and I could try to explain it if someone asks, but focus on the scoreboard and you cant see whats going on in the game. For me, when I was new, I was too dumb and under too much pressure to monitor both. At the end of the post I hope I remember to give specific advice to new or struggling traders. If I don't, ask me. It's the advice that I wish I'd gotten and it is now the cornerstone of what I do.

I may have typed this or parts of this in the forum in the past.

In the early 90's I was a salesman (stockbroker) at a small regional boutique that specialized in 1st tier and mezzanine financing in tech and biotech. The salesman role at the firm was evolving into selling Reg D offerings to qualified investors. I was a great bond salesman earlier in my career but I did not understand or believe in many of the offerings my firm was working on. I had ethical questions and thus was not selling anything. Our firms "trader" was a veteran and a wealth of information, but his personality did not work well at the firm. A door was opened...

The trader, recently married, demanded that he was entitled to his vacation time in consecutive weeks to enjoy his honeymoon. He wanted to pick someone to "train" as his backup. I was asked if I'd consider it, I think because the senior management trusted me, but also because I was not "selling" and perhaps to valuable to simply be fired.

I was not who the trader wanted, so my week and a half of "training" was brutal. Within a half hour of the open on my first day I soiled my pants. Go ahead laugh about it...I sure do. No shit, pun intended< I was going Hawaiian by 9am. The phone would ring and someone would be yelling shit fast as hell in a vernacular that might as well been ancient Greek. The only words I understood are not appropriate for the forum. Brokers were sending orders and calling for fills, begging for ad credit and watching my mental and emotional breakdown.

Before 10 I heard a voice that I recognized from the few phone calls that I was allowed to take during my "training". It was one of the girls from a wholesaler desk of the greatest human being I've met in business. I tear up thinking about him as i type this. She was telling our receptionist that she had a meeting with me. Against protocol and probably NASD rules, I opened the door and let her on the desk. She said, Danny, fuck those guys, you are going to get through this. Apparently "the street" was aware of the situation and could smell blood in the water.

She took a Sharpie and put a B on the back of my left hand and an O on the back of my right hand. Yep, I did not know the difference between the bid and the offer when trades would come at me on the phone. She said if I hear "you're bid" or "at you", that I should say, let me buy 1000 and get out of your way. Conversely, if I hear "I'm bid" or "take you", I should say, let me sell 1000 and get out of the way. In an hour, this woman had given me enough training to at least survive on the phone. As long as I live I'll never forget that day.

By the afternoon guys had lightened up and were being reasonable and even engaging in small talk on the phone. I survived the Chicago NASDAQ community for at least my first day.

At 3:30 the guy that owned the firm came over to the window and asked how it went. He said the clearing firm had called because things seemed different in the account. "How did it go today?" I said that I was sorry if I'd fucked things up and that I'd do the absolute best I could to get us through. He said, "Whatever you did today, can you do it again tomorrow?" My response, "I'm so glad you aren't telling me, I'm fired." I had no idea what the firms positions were, a huge failure on a real responsibility. I had no idea about anything, really. So the boss tells me that Fidelity called because the activity was significantly up and that the desk netted $19,000 that day...ten times a typical day. They would lower our rates if that becomes typical and did we need additional support? It was my first effing day and my soiled shorts were still stinking up the bathroom.

I never went back to sales. Actually, I never went back to anything. I was a trader now.

The only expectation I had was help the firm and try not to get fired. When the other guy came back from his honeymoon the was given the option of share the desk/deck with me or leave. He left.

Expecting profits means that if you don't make profits you have failed. Most people are seriously underfunded, especially for short term directional speculation. Focus on making good trades, profits will come. Expect to execute well and defend your capital. When the review shows a less desired outcome, embrace what you can learn and focus on improving your method or your execution. This way every outcome is an opportunity. Personally I study the bottom 20% of trades. Admittedly my frequency is down (which is another topic) but imagine if the bottom 20% of your trades started to contain trades that you made money on?

Anyway I'm losing focus because I'm so damn hungry.

Advice:

Expand your time frame...significantly. If you are day trading the ES because you do not have enough capital to carry positions, STOP, you are going to lose all your money.
I suggest finding a price via whatever method you think works (yes, tone is of the roll the eyes type) where you can responsibly get long SPY. Learn to trade /ES (or /MES if necessary) from the short side, delta neutral, against the SPY. This will allow you to relax and use time in your favor. You will develop immensely and at a rate much faster than usual. Granted, you are not leveraged naked long/short so you won't bank or burn as fast, but you will be able to stay in the game with confidence and develop your approach. I realize that under some amount of deposit, that the pattern day trade rule is in the way. That is to protect the consumer, think about that and expand your time frame.

After I eat something I'll show a risk analysis tab for /MES and SPY...now as I'm thinking about it that might require like $50,000. If you have a significant deposit, chances are you understand my point. While your approach may differ, please consider what Ive said from the perspective of people that are trying very hard against long odds. I don't need to be right, I'm simply hoping to help people, especially people that struggle and are without guidance.

Dan

Fantastic post, @wldman There's so much to take from it that I can't put it in one post.

But since no one else mentioned it, congrats to you for handling that situation with aplomb. I've unfortunately never worked in trading but I can't imagine setting someone up to possibly fail like that. I feel like I know how that conversation went with that trader after they got back from vacation. I am glad you got the desk, and if it were up to me I would have promoted and/or bonused that great person from the wholesaler desk that did more to help you in minutes than the other person did in a week and a half.

Anyway enough of that, over time I'd like to learn more about these time frame expansion strategies you are describing.

Thanks for the insight and Cheers!

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  #30 (permalink)
 
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 mtzimmer1 
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July 2018 I stumbled upon a video on YouTube about a daytrader’s ‘lifestyle.’ It seemed glorious and instantly had me hooked on the prospect of overnight success and great riches.

One month later I bought a course. There was plenty of BS, but I did learn some crucial elements of trading from the upstart. The teacher stressed again and again the importance of having a plan and sticking to that plan. He also had the same reaction to a big win as to a big loss. This was an important psychological trait to witness as emotional detachment from results is a crucial element of profitable trading.

In true beginner fashion, I abandoned the aforementioned method approximately one month later, after losing money trading live. Who woulda thought I’d lose money going live after two weeks of learning!

For the next four months I bounced around testing countless indicator combinations and ‘surprisingly’ found nothing of substance!

In January I happened upon Damian Castilla’s videos on YouTube as well as his thread on forexfactory. It amazed me that he could consistently lock in $10,000+ sized wins without any indicators on his screen. I began to learn Damian’s methods of price action and acquired bits and pieces from other members on his thread. I demo traded for two months and broke even for the most part. I then opened a live account and traded SPY (SP500) ETF with small risk (approx 1-2 MES). I actually came out in the green by a small margin.

Fast forward to now, I decided in June to move up to 1 ES contract. June has been a green month!

When I began trading I expected to win overnight. That did not happen. When I restarted my trading journey with price action I expected to be able to get to profitability but did not know how long it would take. Now I am 1 year into my journey and have had a profitable month. It would be foolish and naive to assume that because I’ve had one good month I am now consistently profitable... BUT it is a start and I am on my way to consistently tipping the scale to the green side!


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