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Day trading - Smaller profits on size versus larger profits on smaller size?
I don't find you blunt at all. But if I may be blunt in return - is your answer rooted in your own success following approach a.?
I've spoken to several 'size' traders over the year.
The Flash Crash trader (Navinder) was also known for scalping the market for ticks on huge size.
I agree that this is key.
However, if you want to capture a 10 point or 20 point swing - you will often have only a few opportunities per day to transact and your timing must be excellent. If your goal is to capture 1.5/3.0 points per day/trade you have far more opportunities for doing so.
I think it all goes back to consistency. I had a day where I netted 40 + points per contract this year. I've also had a few 10 + points day. Other days I've been in drawdown and had some 20 + trades just to get back to green.
I think I have a better chance of being consistent with a scalp approach. As my account grows - I can start trading these larger swings too, but on a smaller contract size.
I don't claim to hold all the answers, so we'll see how this turns out.
yes, to some extent. I cannot say I am a profitable trader since I haven't recovered for all that I lost when I first went live 3 years ago. However I am nowhere near where I was three years ago. When I began trading I used to have some devastating days and I blew up a couple of accounts in few months.
Since then I enrolled in many combines with TopStep and I saw the evolution. The first time I passed an evaluation with topStep it took me almost 7 months, since I was always breaking rules. Now it takes me 15 to 20 day.
Now I am in their pro Account and I can say I trade reasonably well.... you can see my story and my progress as a trader in my trading journal.
I tried to scalp in the past and the problem is that , this strategy has an "embedded" higher win rate. If you trade with anything that has an inverted RR, the winrate is higher. The problem is that you cannot see the risk of ruin. Imagine that you have a strategy in which you buy any pullback in the Nasdaq and you don't use stops, so that you can leave the trades some room to breath. I think that 98% of the time you will make money, probably for 3 months you'll make a steady amount of money each day, the problem is that there will be a day in which a sudden move of the market will wipe out all of your profits.
This is what happens very often to options traders.
There is one metric that should be taken into account: robustness. If you use a method with 4:1 RR and winrate of 35% this method will be extremely robust, because of the high RR. On the contrarty if you use a method with 1:1 RR and 60% winrate, it won't be robust at all.
With robustness I mean (my own definition) how fast you recover from a streak of losing trades.
For some reason I was not able to load page 3 (it redirects me to page 1), so I'm not able to quote your post directly, @SBtrader82. Anyway, thanks for sharing your perspective and experience.
Regarding R/R - I think it's generally hard to generate 4:1 RR day trading the ES on average, unless you actually accept a very win low rate as the result of using tight stops. With such an approach you also need to make sure you actually do ride your winners when you get one and here many people simply cut their profits short while taking full stops. So, I'm not so sure it's necessarily easier to do that either.
I've catched some great swings lately. One trade I remember from last week was + 20 points with a stop less than 5 points. So, 4:1 RR. However, doing that consistently isn't easy especially as the market doesn't always provide these 20 point swings on a daily basis.
Your example of not using a stop isn't relevant as I didn't suggest not using a stop. My average stop will be 5 points.
How robust a system is relates to compounding, too. Last summer I had 20 winning days in a row trading 1-2 contracts. Thought I knew something, scaled up to 3-5 contracts and lost most of it on 2 'normal' losing days. By the way - this was done with a scalping approach.
When I now start implementing my new approach it's absolutely essential that I don't compound my size until I have generated substantial profits. We should never put ourselves in a situation where a normal losing day eats away weeks of profits. If that happens - we either compounded too fast or didn't generate sufficient profits prior to that, i.e., our system isn't good enough.
2 trades x 1,5 points x 3 contracts = $450 gross (real money).
Done for the day in 25 minutes.
It's very unusual for me to exit on limit orders - at least so small profits. So, it may take some time getting used to. I could feel myself wanting to adjust the limit higher. I will probably stay on 3 contracts this week, but the goal is to eventually move up to 5 contracts as my standard contract size.
Note:
- Both entries were good with little heat, but would have ended up B/E scratch trades the way I used to manage trades in the past (trailing stops and trying to capture the big one).
- I know that one day (2 trades) is essentially meaningless, so we'll see how it goes.
What I do like about this is that I can stay very relaxed just looking for that place where I feel pretty certain I can capture a small profit with low risk.
Another profitable day, but shortly below target. Approx. 2.25 points per contract.
1st trade B/E (auto-BE). Hit my target on the second trade with 3 points (on 3 contracts) in one trade. Should have called it a day, but got greedy and did 2 FOMO trades and finished the day with a successful 1 x 3 point scalp on 1 lot.
The FOMO trades were done on 1 contract and the actual trade idea was good. It was just my entry that was way too late. I will probably allow myself 1 x 1 lot trade after hitting my daily profit target on size, but not allowing for more than a 5 point loss.
The key here is to stay really disciplined and just wait for that moment where 1.5 or 3.0 points is ripe. I just need one good trade for the day and I'm done.
For now - I've decided to target 3 points per day. I stopped trading because I reached my target. I'm not sure about daily maximum loss, but will probably call it a day after one full stop-out, i.e., 5 points.
One scratch trade + 0,25 pre-market (trying to capture the big one) on one contract.
Hit my daily target on my 2nd trade (3 points on 3 contracts).
Did one scratch trade + 0,25 and one loss - 2,00 - both on 1 contract.
Note: The losing trade would have been a profit if I didn't move my stop, but hindsight is always 20/20. Tight stops can be deadly on ES, though, as there's a lot of back-filling.
This is real money in case there's any confusion. Not that it matters...I don't have the commission structure set up in NT. I like tracking performance without and have a spreadsheet where I track my net results.
For disclosure I gave back most of the gains earlier this week today. I closed down my computer, but lost approximately 8 points. One full stop-out and a few smaller stop outs. It sucks, but it is what it is. I'm painfully aware that this method requires the utmost discipline and patience.
Today's main mistake was to actually trade in the first place. It's a Friday, op-ex and I actually had some other things to attend to later on, so didn't have time to committ for a full session. But I figured I could be done in an hour. Big mistake: do not trade unless you have the time available to commit.
I had one final trade targeting a runner which would have made me whole for the way, but got stopped out B/E on that one. Almost good enough isn't good enough in this game.
