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New to futures, trying the "improbable"


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New to futures, trying the "improbable"

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  #1 (permalink)
PatrickBateman
Kansas City
 
Posts: 7 since Dec 2016
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Hello all,

I recently teamed up with a partner and have began trading futures contracts with a very small initial investment. I have read a lot on this forum that has discouraged people from starting with a very small balance due to the implicit leverage (sound advice to be sure) but in my eyes not a hard and fast rule.

We are using a system that is not completely automated, and requires some human discretion and have experienced both small degrees of success and failure.

Our paper trades were all positive profits, switched to a Live account and immediately began losing. We lost 35% of our capital within the first 10 days of trading. Lots of lessons and reasons this happened.

The next 6 days brought me consistent profit (not only gained all the lost profits, but an additional 25% or so of our initial capital).

Riding a high, we then entered a trade long when the market was primarily long positions, and vulnerable to a big sell off. This proved to be a very bad day, and the market tanked. We lost about 65% of the fund between this day and the following, a big loss but much smaller than the sell-off day. One huge positive from all this is that I have realized I am numb to losses. This helps eliminate emotion. However, when I am up, I do get a bit of a winner's high, and I will look to tame this.

Currently, we closed shop for the holidays and look to pick back up this week.

My aim for this account is to avoid blowing it up and slowly work to double account size. We are both business school graduates with finance backgrounds, working in various industries all the way from Mergers & Acquisitions, Real estate, business management, etc.

We are aware of the high leverage and therefore high risk we are exposing ourselves to, but we are also able to feed the account should we need, and if this particular fund doesn't work out, the loss will not affect our daily lives.

Look forward to strengthening my technical analysis knowledge, and overall market experience.

Big Mike's automated PM came in and I will surely go through the info listed there.. Outside of that, most information online is spam, and it's a shame. But our industry is one of which is very secretive so it is understandable.

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  #3 (permalink)
 
TradingTech's Avatar
 TradingTech 
Chicago, IL
 
Experience: Master
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How did you go about "paper trading" the model? Did you account for slippage? Brokerage fees? How did you determine you were filled while paper trading? Did you simply mark a fill if the price traded? If the price traded through?

There's much to be considered here. Keep the faith. Plenty of good souls in this forum to help you get back on track.

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  #4 (permalink)
PatrickBateman
Kansas City
 
Posts: 7 since Dec 2016
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TradingTech View Post
How did you go about "paper trading" the model? Did you account for slippage? Brokerage fees? How did you determine you were filled while paper trading? Did you simply mark a fill if the price traded? If the price traded through?

There's much to be considered here. Keep the faith. Plenty of good souls in this forum to help you get back on track.

Using a brokerage account platform. Usually would mark a few tick sizes away as entry and exit points from whatever the demo said to account for slippage to make it more realistic. Also held for the exact periods of time (had to be flat 30 mins before market close each day) and otherwise were very strict on replicating a real life environment.

Broker fees were accounted for also. My main goal is to learn more about institution trading to figure out their psyche. Any discussions you've seen that may be beneficial, TT?

Regards,

Hazem

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  #5 (permalink)
 
Tymbeline's Avatar
 Tymbeline 
Leeds UK
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PatrickBateman View Post
We lost 35% of our capital within the first 10 days of trading. Lots of lessons and reasons this happened.

The next 6 days brought me consistent profit (not only gained all the lost profits, but an additional 25% or so of our initial capital).

Riding a high, we then entered a trade long when the market was primarily long positions, and vulnerable to a big sell off. This proved to be a very bad day, and the market tanked. We lost about 65% of the fund between this day and the following


Sorry if it sounds critical, but what all these figures very strongly suggest to me is that your position-sizing is totally inappropriate to what you're doing, and as result of that, you're really "gambling" rather than "trading".

I would suggest carefully studying something (perhaps by either Van Tharp or Michael Harris) about position-sizing, before proceeding.

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cescoto's Avatar
 cescoto 
Edmonton,Alberta/Canada
 
Experience: Advanced
Platform: NinjaTrader/TOS
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Saying win/loss of 25% or 35%....cloud's your mind....just because small account....remember is leveraged......

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  #7 (permalink)
PatrickBateman
Kansas City
 
Posts: 7 since Dec 2016
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Tymbeline View Post
Sorry if it sounds critical, but what all these figures very strongly suggest to me is that your position-sizing is totally inappropriate to what you're doing, and as result of that, you're really "gambling" rather than "trading".

I would suggest carefully studying something (perhaps by either Van Tharp or Michael Harris) about position-sizing, before proceeding.

No love lost for any criticism either expressed or implied... I appreciate the good nature of your post. The only reason I posted a percentage is because I wanted to put it in perspective for any readers but did not want to explicitly state the actual size of our account. However, you bring up a good point and one that I will certainly note.


cescoto View Post
Saying win/loss of 25% or 35%....cloud's your mind....just because small account....remember is leveraged......

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Hi Cesc, as I stated above to Tymbeline, I do appreciate the spirit of your post. The percentage was to give you all an accurate idea of our performance without listing a financial figure. Does that make sense or does your advice still stand? Of course, the leverage is 100% helping us and that is the reasoning behind trading futures in our case, but given the right (i.e. liquid) commodity, we are able to scale in (add contracts) as we get profitable to keep using leverage to our benefit. Certainly we'll have to account for some slippage and will be capped at a certain contract size when trying to get favorable bid/ask prices but that is to be expected.

Any other thoughts guys? Switching brokers and have been unable to trade, looking to wire money and fund account this week and get back on it by next Monday at the absolute latest.

Regards,

P.B.

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  #8 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
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Leverage is fantastic when you are right but a killer when you are wrong. While I don't trade the same way many on these forums do, you'll find that a very very common rule of thumb is to never risk more than 2% of your account on a single trade. If your system is a 50/50 system, you have a greater than 3% chance of losing 5 trades in a row. At 2% per trade that's almost 10% of your account, at 5% per trade thats 23% of your account, at 10% per trade that's 41% of your account. So if you trade 5 times a day/week you would expect to hit this threshold once every 32 days/weeks. One of the best rules of trading, is surviving to trade another day.

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 SoftSoap 
Canada
 
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If you're looking for feedback you should provide us with more information. What instrument are you trading? How many contracts? What's your risk/reward? Approximate size of the account? Win%? Expectancy? How many trades per day?

Also, I hate to be the one to say it but if you can lose 65% in a matter of days, be prepared to lose your account. With swings that huge, it's not a matter of if you blow that account, it's a matter of when.

What you guys are doing with the big % swings up and down is bold. I'm going to quote @suko when he says that "there are bold pilots, and there are old pilots. But you don't see many old and bold pilots".

The beginning stages of trading are all about capital preservation, and when you just focus on profits, you are furthering the odds of making it in this business against you. You said it's not a big loss if you guys lose your entire account, but you don't have to blow up an account to learn about prudent risk management.

Coming on FIO is a good step towards improvement though, and I suggest reading through some of the threads on here. At $100, the elite membership provides you with significant value at very little cost. There are lots of useful webinars and threads that are only accessible to elite members.

You should also think about starting a journal and tracking your process, trades, and so on. This will help you identify your strengths and weaknesses, and it'll let other traders chime in on things you might not be doing as well. FIO has a ton of good journals to read to get some ideas.

Cheers.

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 SoftSoap 
Canada
 
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PatrickBateman View Post
One huge positive from all this is that I have realized I am numb to losses. This helps eliminate emotion. However, when I am up, I do get a bit of a winner's high, and I will look to tame this.

Also, just because you felt numb to that loss, doesn't mean you are numb to losses (anecdotal fallacy). That's a pretty bold absolute, an unlikely one, and one that you shouldn't want to strive for.

Trading psychology isn't about being numb to emotions, but about understanding what triggers those emotions. Then being able to put them aside so that you can still make adequate trading decisions. Almost everybody feels emotions, we are humans. Accepting that is the first step towards being able to keep them in check so they don't affect your trading.

Just a thought.

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