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Testing Different Time Frames

Patience is not currently one of my strengths although I am getting much better at it. When it comes to trading, I believe you've got to have a lot of patience and discipline to remain consistently profitable, if profitable at all.

For the last few months I've been back testing and practicing my strategy on longer time frames to see how it performs in comparison to the three minute chart, which I've always traded. What I've noticed is that on a gross basis, my strategy tends to perform very similar on a 3 minute and 15 minute time frame.  However the 15 minute chart is much more profitable on a net basis because it is not taking nearly as many trades and it is also holding longer so the average profit per trade is much bigger, even compared to the average losses.

The challenge for me however is that a longer time frame requires much more patience and this is something I have to get used to. In general, the longer the time frame, the better my strategy performs so over time it looks like it will pay if I can learn more and more patience with my trading so I can maximize my profits.  This will take some time but the numbers are convincing so I am willing to work on it.

Today required a lot of patience.  I only placed two trades using the 15 minute chart but my strategy performed almost as good as 14 trades did on the 3 minute chart (I didn't take any of the 3 minute trades). However, forcing myself to wait by sticking to one time frame (as per my plan at the beginning of the day) was a good exercise for me and I believe more days like today will not only help me become a more patient trader but also a much more profitable one in the long-term. 

The point is, patience is good as long as you actually execute at some point.  Just like most things, it takes practice to develop. Secondly, if you haven't already, take a look at some other time frames and see how your strategy performs. The results have really surprised me so perhaps they will you too.

Cheers!

Calculating Your Per Trade ROI

The other day I came across an "educator" specializing in e-mini strategies and they told me (as is also stated in their marketing claims) that their students get a 10% return on their money trading the e-mini S&P's for every one point in profit. My first thought was, "you do? Wow, that must be some system." My second thought was, "you are retarded".

In reality I just sat there and smiled whilst they carried on about how fantastic their returns are but it got me thinking.

His math works like this: His broker gives him $500 day trading margins.  Every point on the ES is worth $50. Therefore, $50/$500 is 10%.  It looks even better for those of us trading the Russell (TF) since one point is $100 or 20% with $500 day trading margins.

I suppose there is some logic to this calculation but I still think it is flawed.

First, not all brokers will give you $500 day trading margins therefore, this 10% ROI trading the ES is not universally applied.  For example, TradeStation gives me $1375 day trading margins so my ROI is only 4% trading the ES - no wonder it feels like I'm hardly making any money!!

Second, to take advantage of the $500 margins you actually have to open an account with lets say, $2,000 (TS requires $5K, making my life even harder).  Therefore, you really have $2000 at work when trading that one contract. As an aside, I realize that you can still trade if your account drops below $2K after you open the account and I also realize you can theoretically hold four contracts with your comfortable $2K account balance but if you do that, I wholeheartedly stand by my second claim regarding retardation.  

Third, and following up from my second point, in reality, when smart traders are trading, they are not controlling as many contracts as their account will allow. To do this is suicidal. But unless you are doing this, then once again, these per trade ROI figures are bogus. 

Normally, when one calculates their ROI they do it on a per trade basis and then based on the overall account. Unfortunately however, I don't think there really is an easy answer for a per trade ROI when trading futures. Though it works differently with stocks, options and EFTs.

For example, today I closed out of an options trade I put on a few weeks ago. It looked like this:

Bought 1 Dec. 95 call (DIA: DAVLQ.X) for $3.57 per contract.  The actual debit from my account was $357 (plus commissions). Today I sold said contract for $6.25 and the actual credit to my account was $268 (again, less commissions).  Therefore my (gross) per trade ROI was 75%. If I add that $268 gain to my overall account balance, the ROI is much less, it's actually rather nominal.

At a minimum, futures traders should calculate their ROI based on the overall account balance but once again, I think it is very difficult to do it on a per trade basis and I don't think the method that spits out a 10% return as described above is the right way to do it. Furthermore, doing it this way to market your education business is flat out wrong, in my humble opinion. 

If I feel compelled to calculate my per trade ROI, which I currently don't, this is probably how I would go about it:

Per my rules, if I decide that I will control one contract for every $5K (choose your own number) of account equity, and I happen to have on 3 contracts during a particular trade, I actually used $15K of account equity to control that trade and therefore, my profit (or loss) on the trade would be divided by $15K to calculate the per trade ROI.  I know that doesn't sell very well in the education business, which is filled with hype and an abundance of bullshit but in my opinion, this is an appropriate way to think about it. 

If there are any other opinions on the matter, I would be interested to hear them.  In the meantime, congratulations to the DOW for crossing 10,000!!

I Miss My Blog

I am supposed to be in bed right now.  Before that, I was supposed to work out so I wouldn't get fat. Before that I was supposed to go over my trades so I could be a super trader and give quotes about my awesomeness to the Wall Street Journal and Stocks & Commodities Magazine.  Before that I was supposed to actually trade.  Before that, I can't really remember but I am sure there was something.

The point is, I miss my blog.

I keep saying I am going to get back to it but I obviously continue to wallow in the mire, as it were.  However I have noticed something, at certain times, blogging is a drag and it gets kind of old.  At other times, blogging is a fantastic motivational tool and it absolutely has had a positive impact on my trading. So...I need to stop spending so much time trying to figure out why my fantasy football team sucks so bad this year and instead come up with something meaningful to blog about; like how cool I am.

In other news, my wife and I had a baby this past weekend. Actually, she had the baby but I cut the chord whilst shooting footage and snapping pictures - I am multi-faceted like that. And don't worry, it is kid friendly footage that can be passed down for generations. 

We had a baby girl and I can now officially declare we are done!! The vasectomy will be scheduled soon since my massive deductible has now been met. So I have a good excuse for not trading the last couple of days; I've been changing diapers while wondering what the hell I've done...again...but she's too cute to complain.

Life is good but I still miss my blog.

I am going to bed now.

Even Professionals Need a Coach

I am a huge fan of MMA and last night I was at home watching The Ultimate Fighter and there was a scene in the show that made me think of trading.  The coaches on Team Rashad were frustrated with Roy Nelson, who is one of their team members. 

For the record I think Roy Nelson is a fat ass and I hope he gets his face beat in by Kimbo Slice next week but I digress.

Roy is already a quazi professional fighter and he thinks he already knows what he is doing so he wasn't taking any of the coaching he was getting very well. He clearly thought he knew enough to get by on his own and didn't need to hear what the other coaches were suggesting, which is ironic since Rashad Evans has certainly earned his stipes in the UFC but Big fat ass Country Roy Nelson hasn't.  Because he is fat and gross and simply deserves to bleed, especially after last night.

The point is, as I sat there watching I couldn't help but recognize that most professional athletes have coaches they work with on a continual basis. Those who don't probably have an attitude like fat Roy and as the result, fail to ever make it to the highest levels.

Peyton Manning (who I think is overrated) works with a quarter back coach every day; Kobe Bryant (who is arguably the best basketball player in the league) also works with a coach; Michael Phelps has a coach, professional fighters work with coaches and the list goes on.

Just because you are a professional and even an elite professional does not mean you are above coaching.  There is a huge benefit in having someone else watch you make your repetitions, help you tweak your moves, offer motivation, strategy and support.Many people think coaches are just for beginners or even unecessary all together. The fact of the matter is that a good coach can make all the difference.

So as traders, how do we find coaching to help us get to the next level? I personally do not work with a coach but it is something I would really like to do because I know it will have a positive impact on my performance. In the meantime however, I follow a lot of blogs and learn from other traders, I read books like Stock Market Wizards by Jack Schwaggar, I subscribe to all of the futurures magazines, I constantly review my own performance and try to find ways to improve and even replicate those things that I already do well. However I lack a coach.

I know I can go and hire a coach who I can work with but I am already a consistently profitable trader and I don't want to pay to learn someone else's strategies when I already have my own that work well enough, though perhaps there are situations where that could make sense, so I remain open to it.  As an alternative, perhaps there is virtue in simply finding other like-minded traders to work with in somewhat of a cooperative fashion.  In this format we could simply help each other by acting as each others coach. I believe this format could work if all of the participants were already successful in their own right and were able to bring something unique to the table. That way you could learn something new from someone who has proven to be successful with the same idea, etc.

The bottom line is that having a great coach can make a huge difference and adding a coach to your personal trading team should be a priority to ensure you continue to get even better.

Ending Daily Tally

Just a quick update to say that I believe this market looks quite over-extended to the upside, so keep an eye out for a short-term pull back as people look to take some profits. Once we see said pull back, enter positions like a brokeback cowboy and ride the wave of good fortune to higher planes. With the DOW approaching 10,000, I think perhaps we could get a day or two of profit taking before we hit the magic number. That's just my guess.

As for me and my trading, today was a mild day and I missed a few really good set-ups while I was picking my nose and making paper airplanes. I still managed to pull out 4.7 TF points on 7 trades and zero losers. I like those odds. 

Stay tuned for a "serious" post at some point soon.

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Please Play Music

Yes, it is almost that time again ladies and gentleman, I am preparing my resurgent hobby as a part-time, half-ass blogger. I can hardly wait. Can you?

I have effectively most assuredly lost any follower I ever had but that's OK, I would have broken up with me too.  But it's time to put your lipstick on again because the party is about to start...again.

I continue to trade and I continue to trade well, though I must admit, this summer was not fun for trading.  It stressed me out, gave me quite a few more grey hairs, made me question my strategy and manhood and ate up some uncomfortable portions of cash in the process.  But, I still have some left and more than what I started with for that matter so life is good. Having said that, I still drive this piece of crap Honda Accord that will not seem to quit on me and therefore allow me to fully justify buying something a lot cooler, yet cash depleting, and I still have this damn full-time job that I can't seem to shake -- like a one-night stand that won't seem to go away.  Except in this case, I've been one-nighting it for almost six years. But why walk away from a perfectly good cash flow if I don't have to but simply want to? I won't.

As for today, I am up almost 4 TF points and about to go buy some sushi.

In the meantime, start to expect some more blogging out of this corner of the blogosphere because the music is playing and I'm on my way to the cage (whatever that's supposed to mean).

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I'm Not Dead

Well. I've been gone from the blogosphere for weeks now and I have to say, it has been fantastic. Not that I haven't missed my three readers and all but the break from blogging has been stellar and I think I am actually going to continue it for a while. 

However first, I wanted to make sure that any passersby don't run off thinking that this blog is just another tombstone for a trader gone bust.  Not so. My trading has been going very well.  I've been making some fine-tuned adjustments to my strategy and I've been focusing hard on executing to plan. I have no doubts whatsoever about my longevity in this business.  Not because I'm a cocky S.O.B but because I've been growing a mustache and I know how successful traders with mustaches are. 

At any rate, trading is going just fine in my part of the Internets and I am excited for the future.

I have decided however that my break from blogging has been a good idea and has really helped me focus on my trading and not so much on what others might think of my trading.  I'll be back for sure, just not yet.

Hopefully my fellow traders/bloggers have been doing well.  I check in on many of you often and I am always happy to read about your experiences. Keep on keeping on.

Adieu.

Too Busy, Too Much

I have to take an official break from my blog for a week or two. I'm just too busy at work right now and I'm working on another project that is taking even more time at the moment. As the result, I'm turning into a lame blogger so I should just tap out temporarily and come back a little later when I have more time to say something meaningful. I am still trading but that too continues to get interrupted due to having too many things on my plate and unfortunately I can't de-clutter just yet.

On Friday, I didn't make any live trades. We had the gap on the open and my strategies were in conflict so I didn't like my probabilities.  Instead, I turned over to the simulator just to see what would have happened and I would have lost money, so it is good I knew when to stay out of the market with my own money. At one point I was down about $2,000 as I made several mistakes and didn't manage a few trades appropriately.  But I ended the day down just $300 on a stellar comeback. I was trading slightly bigger than I would have in "real life" but not so big that it couldn't have been realistic. I just wanted to get some practice with multiple contracts since I'm getting to a point with my cash account that would justify taking on a little more size without skewing my risk management guidelines. It felt a little weird at first but once I started to get more comfortable managing my intra-day P&L with the bigger size, I drastically improved and cut my losses back significantly. It's clear however that before I trade with more size, I need to spend some time on the simulator just to get accustomed to it as bizarre as that may sound.

Today I made one trade that netted me one tick.  It's really quite overwhelming but I'll keep the excitement in check. I entered on a great set-up but had to exit prematurely as I was called away from my desk...when I got back price had moved in my favor by a sizeable amount and it simply made me want to quit my day job so I can simply focus on my trading so I can actually make me some serious cash. Not yet, but the day is coming soon...

I have to travel for business this week and I will not be able to trade Wednesday through Friday so again, just another reason why I should call an official time-out on the blog. No reason to keep checking my posts only to find the same old stuff.

I'll be back in a week or two.  So until then....carry on.

Fake Money Profits

I finally had some time to trade in a legitimate fashion today. Though I'm not quite sure what illegitimate trading would look like but regardless, today was legit. However this is said with one caveat in place: I traded the first part of the session live and the second part on the simulator.

Why?

Well because TradeStation has been pissing me off lately and I would like to replace it with a different execution platform that isn't so slow. So I had to spend some time testing out some other platforms, which I did. However not before I at least took a couple trades live. I ended up taking two live trades for just under 1 TF point. Nothing too exciting but still, a gain is a gain so I'll gladly pocket the change and move on.

Volatility in my opinion was a bit wild this morning so that caused me to sit on the sidelines for a while and then pretty much scalp out once I got in just to be safe. On my first trade, I scalped a few ticks perfectly as price quickly turned for the worse once I got out.  On the second trade I left a size-able chunk of coin on the table due to the scalping strategy but at least I followed through on my original intention, which is always most important. Right?

By the time I got on the simulator, which happened to be during the afternoon session, price had settled down a little bit and I was much more comfortable with the direction and I was able to use the pivots to help me time my entries and exits. I thought about going live to take advantage of the situation but I had just spent 30 minutes setting everything up so I figured I should just follow through and worry about the big picture instead. Besides, the market could've changed...

15 trades and $1,080 fake money profits later, I exited my last trade and turned to other obligations. I DID NOT break any rules while trading on the simulator because that does not offer any benefit. I entered only when my strategy indicated and I also got out when I was supposed to.  So that offers a bit of good news and bad news. The good news is that my strategy worked very well and I only took two losing trades out of 15 and they were small losses - near break-even small. The bad news was that I was on the damn simulator so all that "should've been" coin wasn't. Such is life, but still.

And here's the even worse news, I didn't like the platform I was simming on but at least now I know...

Missing Opportunities

Today was another busy day yet again but I did manage to get in on a few trades. I specifically took three of them, which all worked out for 2.8 TF points. I did however miss a few other solid opportunities while I was away from my desk but that's just how it goes right now.  The fact of the matter is that for the time being, I have another full-time job so I just don't always have the opportunity to sit in front of the screens to do my thing. Hopefully that will change soon.

All three of my trades were long.  I entered my first two between 10:45 and 10:55 MST as price was retracing a bit. The TICK wasn't giving a super clear reading but RSI was so I took my chances and things turned out however I ended up getting out right as price took off to the upside where it peaked around 510. So it goes.

My third trade entered at 12:54 MST at 505.90 and the timing was impeccable because right after I entered price shot up. I exited at 506.80, which nearly took me out right at the top of the run. So all-in-all, I am happy with the outcome on the day even though it wasn't quite what I had in mind in terms of trade frequency.

I am targeting to get some more trades in tomorrow because as it stands right now, I have an open schedule and I hope it stays that way!

Cheers...