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$5,000 Live trading account challenge - CL & ES
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$5,000 Live trading account challenge - CL & ES

  #1 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

$5,000 Live trading account challenge - CL & ES

Hi everybody,

some of you might know me from the TSJ (https://futures.io/elite-trading-journals/38439-scalper-s-journey-1921.html#post647014) where I post regular my CL analysis and also trades.

I saw that there is a July (https://futures.io/feedback-announcements/42381-fio-journal-challenge-july-2017-over-1-100-prizes.html) journal challenge and I thought I would enter it. This journal is designated to a friend who recently challenged me if I can also trade a small live account. I hope to proof to him that it can be done profitable and consistently.

This journal will act as a daily update on my challenge where I post all my live trades with Interactive Brokers statement to hold me accountable.

The next posts will outline my approach and the way I trade. I will also use cross posts from Michael's thread at TSJ (see link above). Right now I just have to think of a good presentation and will post later more. Stay tuned!

Let's see how July will go and if it can be done

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  #2 (permalink)
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  #3 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Introduction


How it all started

I'm a married guy in his 30s. At age 13-14, I got hooked with the financial markets and bought my first stock through my parents brokerage account in 1998. Back then I would follow stock quotes on TV and look them up on video text in Germany. However, I wasn't really buying and selling in a regular manor, just following news to get a basic understanding of the stock market in general and was just holding onto my stock position. Then in 2000 during the dot.com bubble, I pretty much lost everything and was devastated how I could have lost almost my whole investment. At this time, I took a step back and didn't really invest in other stocks anymore.

Education

It took me till 2005-2006 until I opened my own brokerage account and started all over again. I also started a business degree which helped me to better understand economics, monetary policies and macro/micro economics. Here I had some good returns with Apple stock and others which made me believe that I could earn a living via trading one day.

First jobs

However, I didn't get a trading job after I finished my bachelor degree. Rather, I chose to start a master's degree in London and ended up getting a job in a big 4 accounting firm where I did audits and financial due diligence within the oil & gas industry. This was a great way to get a really good understanding of analyzing company financial statements. Then I took a job within an small oil & gas consultancy where we analyzed potential investments and take overs of small oil & gas companies for private equity firms. There I really learned how to do proper market due diligence and created financial models in order to estimate market sizes where companies were operating in. I did this for about 4 years but never stopped trading stocks in my free time and looking for potential investments. At the end of 2013, I wasn't quite happy in consultancy anymore and wanted to pursue my dream of becoming a full-time trader. So I quit my job in the beginning of 2014 and started a full-time trading course with a trading firm in London. There, I learned a lot about how day trading works (especially futures trading) and also received a small live account after I successfully passed the 3 month course. Since then I have been trading with the usual ups and downs.

More personal stuff

My wife who I met in London is Mexican and we moved to her home city (Mexico City) in 2015. I've been living here ever since and haven't regret the move as I'm also in the right time zone which makes it much easier and I can stop at around 3-4pm to enjoy live and pursue other business ideas. Last year we have started a business and are developing new dairy free products to be sold in major supermarket chains here in Mexico. It's still in development but we hope to sell in September/October this year.

That's a brief overview of where I've come from. My next posts will outline my trading approach!


Last edited by mastadee; July 3rd, 2017 at 10:39 PM. Reason: spelling...
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  #4 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Trading style

I start looking at the really long term chart (weekly and daily) where I add important support and resistance and draw long-term trend lines. I normally mark all my charts with a modified Keltner channel by Adam Grimes (offset multiplier 2.25 and period 20) where the midline is also the 20 period EMA. I like to use measured moves for profit targets and areas where price might stall and start a reversal after a big move up or down.

Besides that, I don’t use many other indicators and try to figure out PA and trade accordingly. Then I normally look at the 60min chart, 30min chart, 15min chart and 5min chart. On all these charts I mark support and resistance areas/zones (red and green rectangles). But I also have a 1min ETH chart open which I use for actual trading and to check overnight levels where I also check back to the 30min and 60min charts. Hence, I start the morning with going down from the larger time frames to my trading time frame, marking level which might be important. I consider these levels as zones as a previous price level will never act as S/R at the exact price (here is a detailed explanation of a "zone" - https://futures.io/elite-trading-journals/38439-scalper-s-journey-738.html#post591926). Other indicators I find helpful are opening range set to 5min with extensions X1 X2 & X3 (see 1min trading chart) and I also have daily pivots, y-day high/low and close on my lower time frame charts. On my 5min and 15min chart I also have a volume profile to check at which price levels have we traded the most which also serves as potential S/R levels and I also have a VWAP on that chart. Here are my charts:

Weekly Chart

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I only update levels on a weekly or monthly basis. Also this chart isn't open all the time as it is just for reference and I'll look at it if we run out of S/R levels on the other time frames which hardly ever happens. Hence it's the chart which doesn't need to take away any screen space for a day trader.

Daily Chart

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My daily chart is open all the time and I also have weekly pivots marked on there.

60min Chart

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I guess that's my main chart for doing my daily technical analysis in the morning and also using it for potential reversals and trade entries when I establish my trading bias in the morning. This chart is always open on my right screen next to my 5min chart.

30min or 15min Chart

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It is on my middle top screen where I use it for reference while trading on the 1min chart and also looking on the 5min chart. This chart I switch between 30 and 15min.

5min Chart

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This chart is my 3rd most important chart after the 60min and 1min trading chart. Here I have the VWAP on it as well and Opening range.

1min Chart

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Chart for trade execution

Actual trading, I use Ninja’s chart trader for entries and exits and normally use market orders to enter and then have my profit limit orders put on my 1min ETH trading chart. I use Ninja’s ATM to use my stop to BE when I’m +5T to manage my risk. Stops are normally between 8-20T depending on volatility and I will only trade a maximum of 3 lots for that challenge. For ES, I will only be trading 1 lot with a stop of 2-3pts but I will focus mainly on CL as I find it very hard to just trade 1 lot but I will see how it goes as I prefer to scale in on the ES.

Fundamentals – I also follow some news and data releases but would probably say that I use 70-80% technicals and 20-30% fundamentals like crude oil inventories, rig count data and of course follow comments if we have OPEC meetings or comments from oil producing countries like Saudi Arabia and other member and non-member countries. More in my next post and daily routine.


Last edited by mastadee; July 4th, 2017 at 12:34 AM. Reason: more infos
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  #5 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Trading set-up

Trading office

Hereís how my office and trading desk looks like.

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At the moment, Iím trading with a laptop (MSI GS60) and 2 Ė 24″ screens (Samsung S24D360) plus an ASUS MB169B+ which I have mounted on top of my laptop. I have 2 of these USB monitors for when I'm travelling and still need/want to trade.

My desk is a custom standing one as I like to alternate between sitting and standing. I have a 50 mega internet connection and use 2 batteries (1 for laptop charger and cable router and 1 for my 2 monitors). They give me plenty of time, about 1.5h, to close my trades if we have a power cut.

Trading platform & software

Broker

I use Interactive Brokers for my brokerage account and also as my real time data provider. This is actually a 2nd account for the $5k challenge. Iím really happy with their services and have never experienced any bad fills or other errors. I know they donít have the most competitive commissions on CL ($4.72 round trip) & ES ($4.04). Itís not the most pretty looking software (see screenshot below) but it works just fine and you get used to it. Their charting is fine too but I prefer NT7 over theirs, hence I bought NT7.

My OS is a standard Windows 10 version.

NinjaTrader 7 (NT7), I have the multi broker lifetime license as I used to have 2 different brokers before. The center laptop screen is used for my broker account with IB's TWS. I always check back if NT has submitted the orders correctly, so far never had any issues and the API connection between IB's TWS and NT works perfectly.

Here is a screenshot of my trading screens:

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  #6 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Daily routine and preparation

I normally get up around 7am, have a quick breakfast and have a 5min walk outside before I turn on my computer. Then I have about 15-20min where I check the overnight action and then start drawing my S/R zones on the 60min chart, check quickly any major news on FT and also do a search on oil (see below):

This morning I posted my pre-trading analysis in Michael's thread, so here is the copy as I think it summarizes my approach pretty good (https://futures.io/elite-trading-journals/38439-scalper-s-journey-1921.html#post647014):

General Market overview

I have setup a market overview on IB's TWS where I can quickly check if we are having a risk on / risk off day and where we are coming from. There I have the 3 risk off instruments on the left (ZN, ZF and GC) and in the middle the 3 equity indeces (ES, NQ and YM) - all 6 charts show the 60min chart. Then on the right I have 2 more charts. When I click on an instrument in the monitor in the top right corner, below it will show me the 60min and 5min chart. It's just a quick overview and it doesn't take more than a couple seconds to quickly see the trends especially for ES trading and get an understanding if we have risk on or off, I normally check these couple times during the session. Then I start my technical analysis on CL.

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Technical analysis:

Just to start how I approach the day normally, as y'all know I have developed into a CL trader over the last year as well. I start the day by looking at the 60min chart and looking for important S/R levels where I draw my "potential" zones. I use zones as we normally never just stop at a price and reverse bc these areas have profit and stop orders but nobody knows where exactly these are. Hence I call it a zone/area where price 'might" find support or resistance. Of course, sometimes we just shoot through these levels and then I was wrong but I'm normally protected by a stop and just have to book a losing trade and then find the next best setup. So that's the technical analysis part of my trading, which I would say make about 70-80% of my trading analysis.

--> here is it for today (July 3rd 2017)

60min looks still pretty strong and we have been up more than $4.50 since June 21st which is a nice 10% up-move. Right now we are still in a nice up trend channel and nothing really calls for a downtrend just yet. The next potential resistance zones are near the highs from 06/14 - 46.68, 06/13 - 46.78 and 06/12 - 46.92 (blue box) and then even $47 (even numbers always give a good support or resistance on the first test where one can quickly book 5-10T profit with a limit order). Then in the beginning of June (2nd and 5th) 46.95 and 47.07 were support until it was broken on June 7th. Hence for me this zone could be a good resistance area where I would go short if we trade up to there today. I doubt this as we have a short trading session today and a holiday tomorrow. But this strategy stands and we might come up there today or on Wednesday (so patience is the key here).

On the other hand, a long would be viable near y-day high and y-day close and at the even $46 level (see green support zones on my chart).
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Fundamental analysis

The other 20-30% are fundamental macro news which also give a direction of the price of oil. This would include that I start the day and quickly make a google search "oil news". There I quickly scan through and check if we had some "major" news concerning CL, e.g. 2 or 3 weeks ago we had this news about Qatar and Saudi Arabia where I believe we dropped like 30-40T in the overnight session and when I checked my charts in the morning (I'm in Central time zone), I was wondering what happened so the news search gave me an explanation. The other major news stuff I follow are the inventory reports (the excel screenshots I post - see previous posts) which obviously move oil like crazy.

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Last edited by mastadee; July 4th, 2017 at 01:17 PM. Reason: adding infos
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  #7 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Day 1 - First trades

In my morning prep I identified that we were still in a strong bullish trend which I posted earlier. This trend continued during the session and made new highs until Nymex closed. Here I should've just followed my morning strategy but I was very hesitant as I thought that Nymex closes midday. I didn't really check in the morning the holiday closing time and thought equities and Nymex would both close at 12:15pm. Hence, I closed my computer only to see in the evening while writing here in this journal what we had a regular close and quite some action before 1:30pm CET and a good 70T upmove...

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Trade 1: Short at 46.59 with a stop @ 46.71 (above high from June 14), it was countertrend trade and I booked 5T and got out. Also my ATM moved stop to BE when first touched but seconds later I got the fill at target and out. --> Counter-trend trade, take small profits, hence out after 3min.

Net profit: 5T and $45.28 after commissions.

Trade 2: Short at 46.75 and 2nd lot at 46.79. Avg. entry @ 46.77, again it didn't look promising as it was counter-trend trading and hence I took 1 lot off near entry at 46.79. Then it traded almost up to my stop at 46.89 but my stop wasn't hit on my last lot and I was filled with a 5T profit. Net profit a huge 2T

Net profit: 3T and $20.56 after commissions.

Here I scaled in a 2nd lot as I normally trade like that on a much bigger account, but I have to adjust my trading a bit with much less capital.

Tomorrow, I will lay out my exact trading rules and system that I'll try to trade over the next month.

Here are just the statements from IB and NT:

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$ +65.84 today, wow hehe but on a starting account balance of $5,160 it is 1.28%

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  #8 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Trading system - Risk limits

I was thinking about how I approach my daily and maximum risk limit last night and this morning. It is actually really hard to come up with a sensible approach when you have such a small account which is over-leveraged.

Daily max. loss limit: $300

Max. account loss limit: $1,000

My profit goal: > $1,000

Loss limit and profit equates to 20% of the account value. Obviously the profit could also be much higher as I plan to trade between 2-3 lots.

However, the biggest challenge will be controlling risk as it is such a small account and as a rule of thumb you would normally use $10k per lot in order to survive draw downs and losing streaks. Hence, it will be really hard to stay unattached to emotional trading and revenge trading.

Therefore, I'm over-leveraging these $5k and I really don't recommend it to anybody trying to copy my approach or trades. A losing streak can easily blow this account. The key with a small account is first to survive and stay break even. So actually my goal of $1k becomes irrelevant and I would be just happy to end it break-even. It's a challenge so I have to try and see if I can proof it and make 20% in a month though.

Risk management is the most important aspect. Over the last years, I have also blown several accounts. It always came down to managing emotions and enforce discipline. I could have several weeks and 40+ profitable trading sessions but then came this one bad day where my reading of the market was completely off and I would go against a strong trend looking for a reversal, scaling into a big position because I felt overconfident and was hoping for it to turn around. In the end we all know how stupid it is because we just get stopped out with a massive loss which sometimes took away a month's profit or even more. Then the next sessions would be filled with revenge trading trying to make it back quickly which obviously doesn't work and would just extend further losing.

Emotions are a major problem of trading where one cannot accept a losing trade and doesn't stick to her/his risk parameters and let losers become bigger and bigger...Hence I was thinking in terms of percentage and thought I could effort to lose a maximum of 20% ($1,000) and then this challenge would be over. But e.g if I make some money and say my account grows to $5,600 then I would allow myself to trade till a minimum account balance of $4,000. The daily risk limit is $300, so I can have 3-4 bad days and I would be done with the challenge.


Last edited by mastadee; July 4th, 2017 at 12:21 PM. Reason: spelling
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  #9 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Trading system - Position size & day trading hours

CL - Trading

Size: 1-3 lots
Trading hours: 8:05am - 1:30pm Central time

I don't like to trade before we have an established opening range, hence I start 5min after the Nymex open. Obviously, sometimes I miss out on a nice movement but I rather observe for a bit to get a better understanding of where we could be headed.

ES - Trading

Size: 1 lot
Trading hours: 8:45am - 3pm Central time

Here again, I prefer to let the crazy opening movement settle down and then enter when buyers and sellers have calmed down a bit. Again, there is lots of opportunities in the first 15min but over the years I have realized that it's just not for me and I need to just stay out of the action.


Last edited by mastadee; July 4th, 2017 at 12:37 PM.
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  #10 (permalink)
Mexico City, Mexico
 
Trading Experience: Advanced
Platform: IB & NinjaTrader
Broker/Data: Interactive Brokers
Favorite Futures: ES, CL
 
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Posts: 733 since Jul 2013
Thanks: 1,262 given, 3,026 received

Trading system - Pattern 1


Reversal 1-2-3

I thought I would also share my set-ups I'll be trading. I will make several posts outlining them with some examples from the past. Here is the first one - I call it the reversal 1-2-3 pattern:

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Of course these will go in line with other S/R levels where we might find floor pivots, OR, YDAY-H/L and ONH/L which act as important levels where buyers or sellers step in.

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