the art of leverage as i see it

March 10th, 2012, 07:17 AM

I am taking Big Mikes suggestion of starting a thread -

it will be based on 2 things

1- will monitor a sim leverage trade to the extreme on both gain and loss sides

2- will continue my agreed competition with bh -on his quest for 20k from 1 k

March 10th, 2012, 07:19 AM

this is for cme -reguarding leverage -test this on a sim that does not shut down over night-
why leverage kills all traders using multiple contracts-time posted 8:43est
using the june contracts -
go short 1 contract at 1356.50-

now allow the trade to run against you on purpose for at least

@ 1364.50 add 8 contract (ave = 1363.61)using 9 contracts

@ 1372.50 add 72 contracts (ave =71.51)using 81 contracts

@ 1380.50 add 648 contracts (ave =79.50)using 729 contracts

@ 1388.50 add 5832 contracts (ave =87.50)using 6561 contracts

so you see why leverage kills imagine 6561 contracts @ 1387.50 -every point is a 328k move

i believe this is the same principal as the grains of rice story from the nile valley

March 10th, 2012, 07:33 AM

you saw in yesturdays action -
we had our 1 contract short from 1356.50 go against us as planned
we then added 8 at 1364.50 -
we now have 9 contracts short from our 1363.61 ave
we took approx 5 points of heat or 2250 dollars of mental pressure
you saw in yesturdays action a p/b to the 1363 support line ,
which at that time we could have reduced our position by 8 contracts -
leaving 1 contract short from 1364.50 -

i decided not to reduce-so will maintain all 9 from the 1363.61 ave -

at the weeks close we are in the red approx 1350.00 dollars

March 12th, 2012, 05:51 PM

no change in the leverage trade -

dh challenge added 2 long trades for 6 ticks each off the afternoon channel action -+150

March 13th, 2012, 08:53 AM

@ 1372.50 add 72 contracts (ave =71.51)using 81 contracts

our over night action -added our next leg in - i am always impressed at how the market came to breakeven on our trade and proceeded up

this is the second time in 2 entries we could have reduced at or near breakeven to restart the system -

time will tell if we get 1 more entry

March 13th, 2012, 12:58 PM

as we near our next entry

@ 1380.50 add 648 contracts (ave =79.50)using 729 contracts

this entry will be layered in

1381.00==81 contracts

1380.75 == 81 contracts

1380.50== 324 contracts

1380.25== 81 contracts

1380.00==81 contracts

the total add is still 1380.50 initial ave buy in

March 13th, 2012, 04:41 PM

@ 1388.50 add 5832 contracts (ave =87.50)using 6561 contracts

we are officially all in on this trade @ 1387.50 ave

at the close we were 1,300,000 in the red-

again at the ave in point we could have reduced for a 1 tick profit on the reduction -

if this trade were to come to the 85.50 area over night i would be inclined to reduce at that area and add higher up on the short

2 -
6 tick loses on the dh challenge in the chop zones ---150

March 14th, 2012, 08:26 AM

we see on the sim trade -

every called out level has now become s/r - how can that be -

the market gave us the chance to reduce and start over 4 times -

but the wanting to be correct is what kills traders accounts

remember every 3 point advance is a million dollar red move -

which greatly reduces our risk reward ratio-

greed and leverage are spelled the same

thus far we have been 2 million in the red

March 14th, 2012, 04:43 PM

well since march 8th -we have seen our first good glimpse of daylight -

had 3 points today positive in our favor -with the hit of 1384.50 ,i was looking to reduce at 1385.50
but did not -

was up approx 984k

closed down 410k

the art of leverage as i see it

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the art of leverage as i see it