Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
You realize that if you trade 25 emini contracts and make 2 points a day that in order to net 500000 per year you have to basically not have any loosing days, pay no commission or have slippage, etc.... anytime you hear talk like this run from the person saying it like they are infected with EBOLA. Start thinking about the math involved in trading.
Lets look at an very simplified example.
Lets say you have a trading method that has a 65% win rate. With a 1:1 risk reward ratio. You take 1 trade a day...in this instance 1 s&p trade for 2 points target profits a day. You trade 25 contracts.
Lets say you trade 5 days a week for 42 weeks...(your not trading holiday weeks, you take a few weeks of vacations, etc)
42 x 5 = 210 Trading Days x 1 trade a day x 65% win rate = 136 winning trades and 74 Loosing Trades (210-136 = 74)
Lets also assume you pay $4 commission for each contract all in round turn.
Winners 136 x $2500 (25 contracts x 2 ES points) = $340,000 - $13,600 commissions = $326,000
This does not include slippage as it will always be worse on losing trades because your targets will most likely be resting limit orders and your stops are just simply stop market orders.
Now if it take multiple trades per day to net 2 points on 25 contracts...the amount you pay in commissions will increase substantially.
What your doing is taking trades that have a far worse risk reward ratio than 1:1.
How many days was that success ratio over? You have no idea what your consistent, reliable success ratio is without a whole lot of days over many different market conditions. 60 or 90 days are not too many.
Oh, OK, it was for 1 day (is that right?), 4 trades?
You don't really have a success ratio you can rely on yet -- not in the sense of something that tells you how you can expect things to turn out. You need a lot more data and experience. You will know when you can rely on it, but it will be more than this.
That's actually a pretty good win rate and r/r -- if it has held steady over a good period of time.
This example has a good strong connection to reality. The one thing I would add is that trading 25 contracts is trading very big size. You'd need a big account and to be a very good trader to manage this consistently.
To put it another way, you can multiply numbers until you are theoretically worth millions from your trading. But even getting to profitability in the real world is just not that easy.
You just need a lot more time doing this. Then you can start to fill in these blanks better for yourself.
All this math makes perfect sense. Thank you for taking time to calculate and write it down.
The question is, where to run? Brooks lays out a system, not without its holes, but it looks holistic to me. I am glad that it got a conversation started here. As I am looking to improve my trading, I am wide open for suggestions. Perhaps, at this time, it would be more helpful to have more constructive feedback (what to try rather than what not to try).
It is good to read about some specific numbers. I hope I am not making an impression of a person who thinks that trading is a piece of cake and trading 25 contracts is nothing. I am here to learn, and your input has been helpful. It would also help to know what the next step looks like. So far, I gather: 1) go over the last 90 days of data, 2) practice 1 contract with bigger TP. What else would be helpful to add?
So, I sold 1 contract to see how long it would last. Found a good setup, etc. Got in, gradually moving my stop behind the high of the previous bar, then a couple of dojis happen that kicked me out. See the pic for the details. Question being, is it normal and to be accepted or is there a way around it?
