Does Anyone Truly Make a Living Solely Trading the E-minis???

[sicktrader 10]

You can put me in the category that feel the SIM is irrelevant. In my mind developing the system is the easiest part of the process, hell, I have a dozen of them and I'm sure most of you do too. The execution day after day and time after time is the most difficult. And also, forget starting on the micro, you can easily be up in points and down in cash since you make about a buck a point and 4 in juice. That's not the way the big ones work. Learn on the mini. This isn't as difficult as you would think.

[macdfx 10]

I would like to open this topic to offer a thread of hope to all of those that find it impossible to believe that one can actually make a living trading solely the e-minis.

 

If you have done it for over a year, it would be great if you could share your experience and how you got there.

 

 

Trade real money. Lose real money. Hate it.

 

You must truly hate losing real money in order to become a winner in the markets. You must also accept that losing money is part of the game; but that doesn't mean you have to like it. So use stops to make your losers acceptable.

 

Study. Regroup. Refill account. Trade real money again.

 

Smaller sizes. Get profitable. Stay small. Be consistent.

 

Resist the urge to scale up. Continue smaller sizes.

 

Rinse and repeat every day as needed.

 

P.S. Don't be stuck on the "e-minis" for your market of choice. Broaden your horizons and you'll find a market that can make you a consistent winner, and not suck your account dry....

[MightyMouse 12]

ktartarotti,

 

8 pages into this thread and it seems that no one has provided you with an answer to the your original question.

 

I am making money consistently since the fall and at this point I am not sure that I can really refer to my profitablility as a permanent condition. If it is, I am still not making anything close to what I need to make a living.

 

Even when I project ahead to where my account is large enough to retire from my other business interests, I will still need a healthy cushion to meet monthly expenses if trading profits becomes my sole source of revenue.

 

You need money to make money trading. The amount of money you are going to need to make enough money to make a living is based on the type of trading you do and the lifestyle you live.

 

Regards,

 

MM

[sicktrader 10]

The past few years my primary source of income is from trading. What many don't realize is you can't make a living at this if you don't know when to cash out. I cash out when I double my balance, evey week or two, without second guessing. Money management is the key to this, which few ever realize.

Edited April 18, 2010 by sicktrader

[Gabe2004 10]

You need money to make money trading. The amount of money you are going to need to make enough money to make a living is based on the type of trading you do and the lifestyle you live.

 

Watching some people who I know are making a decent living trading (more than 100K/year - is that enough?) I would say that you don't need more than 50K in your account to get there; many times even less than that.

 

Gabe

[MightyMouse 12]

Watching some people who I know are making a decent living trading (more than 100K/year - is that enough?) I would say that you don't need more than 50K in your account to get there; many times even less than that.

 

Gabe

 

It depends on how you trade. If you are taking trades that have $350-$750 of risk per trade and you want to keep the risk at about +-2% of your trading capital then you need about $25,000 of trading capital for every contract you trade.You don't need to have it all in an account, but that is the amount of trading capital that you'll need to trade 1 contract. You can do the math for any other size risk you take.

[Kiwi 16]

Agreed mouse. The maths is simple

 

If you get 2 trades per day

And trade 250 days per year

Thats 500 trades per year

with the $100,000 account

 

So if you risk 1% per trade and your return on risk is 25% (so thats a 1.25 expectancy or, every time you risk $1000 your average out come is a $250 win).

 

If you don't compound (grow with accumulated income) then you would earn:

 

500*250 = $125,000 pa

 

Risking 2% doubles that. How much you risk will depend on your win rate (and thus your probability of getting a large string of losers). For longer term traders I'd reckon a 45% win rate should risk about 2%; a 35% maybe 1.5% and an 66% win rate perhaps 3% to keep the same risk of ruin. But, for day traders the impact of shocks, errors or other acts of god and yourself is higher so I personally halve the risk figures (1% for a sub 50% strategy and 1.5% for a 66% plus strategy). Kelly's formula can be used to get an idea of the types of numbers - but be conservative because you can't trade if you run out of money.

[BlowFish 10]

 

If you don't compound (grow with accumulated income) then......

 

 

If you don't compound you are not maintaining risk, you will actually be reducing risk as time goes by (obviously). This is likely to make it difficult to make a living (as per the title of this thread) if your starting capital is small.

 

You need to put money at risk to make more money.

 

Sure reduce risk over time but not at the exclusion of slowly increasing the bet size. You need to grow your account size, people do tend to be underfunded but that need not be a deal breaker provided you have an alternate revenue stream. You need to manage the risk you are comfortable with probably reducing it somewhat (% wise) as your account grows. Finally when your account size and risk parameters are where you need them to be you can think about taking a salary. Of course nothing wrong with giving yourself little bonuses for reaching milestones but obviously they will set things back a little.

 

No different to any other startup really. You can't expect to plunk down 5k, increase turnover, and pay yourself a salary all at once.

 

When I say 'you' it was more in reply to MM's original point btw.

[MightyMouse 12]

If you don't compound you are not maintaining risk, you will actually be reducing risk as time goes by (obviously). This is likely to make it difficult to make a living (as per the title of this thread) if your starting capital is small.

 

You need to put money at risk to make more money.

 

Sure reduce risk over time but not at the exclusion of slowly increasing the bet size. You need to grow your account size, people do tend to be underfunded but that need not be a deal breaker provided you have an alternate revenue stream. You need to manage the risk you are comfortable with probably reducing it somewhat (% wise) as your account grows. Finally when your account size and risk parameters are where you need them to be you can think about taking a salary. Of course nothing wrong with giving yourself little bonuses for reaching milestones but obviously they will set things back a little.

 

No different to any other startup really. You can't expect to plunk down 5k, increase turnover, and pay yourself a salary all at once.

 

When I say 'you' it was more in reply to MM's original point btw.

 

Basically, I am underfunded. And it is very difficult to grow an account as fast as I want to when volatility slows down.

[BlowFish 10]

Basically, I am underfunded. And it is very difficult to grow an account as fast as I want to when volatility slows down.

 

Yes, to use an old cliché you can only take what the market offers you. That needn't be a problem provided you can support yourself while you grow the account. Just out of interest how fast do you want?

 

Compound growth is a fearsome thing and while it might seem slow at the beginning it will quickly hit 'critical mass'.

[MightyMouse 12]

Agreed mouse. The maths is simple

 

If you get 2 trades per day

And trade 250 days per year

Thats 500 trades per year

with the $100,000 account

 

So if you risk 1% per trade and your return on risk is 25% (so thats a 1.25 expectancy or, every time you risk $1000 your average out come is a $250 win).

 

If you don't compound (grow with accumulated income) then you would earn:

 

500*250 = $125,000 pa

 

Risking 2% doubles that. How much you risk will depend on your win rate (and thus your probability of getting a large string of losers). For longer term traders I'd reckon a 45% win rate should risk about 2%; a 35% maybe 1.5% and an 66% win rate perhaps 3% to keep the same risk of ruin. But, for day traders the impact of shocks, errors or other acts of god and yourself is higher so I personally halve the risk figures (1% for a sub 50% strategy and 1.5% for a 66% plus strategy). Kelly's formula can be used to get an idea of the types of numbers - but be conservative because you can't trade if you run out of money.

 

It's a matter of style/preference. I can't take a trade with a stop a few ticks away which if you want to employ that trading strategy you mentioned, you need to do larger larger size and tight stops and you need to be very accurate

 

If you are risking 4 ticks to make 5 ticks, taking into account commissions and 1 tick of slippage, at 60%, you'll net about 28 cents a contract. So, that means you need to trade about 1000 contracts to earn that 250 a day. At 50% the strategy is a loser.

 

If you risk 8 to make 10, then your net after commissions and a tick of slippage is $17.78 per contract at 60%. So you need to trade somewhere around 15 contracts to earn $250 a day. At 50% that strategy is a loser.

 

I am calculating these with a $4.72 per contract in commissions and $12.5 per tick.

 

I am not that accurate so my trades are considerably different and require more capital per contract to trade.

[DugDug 10]

and then there is the alternative of trying to take just one or two trades only every two-three days in order to try and make the money.

eg; which is harder to do - both strategy wise and mentally - make $1000 per week, or make $200 per day.

Electronic local (on this forum and his own blog) makes to me the fantastic point of aiming to be CONSISTENTLY PROFITABLE first - after that it makes things much easier.

yes, yes there is risk of ruin, underfunding issues, but these definitely become less of an issue after achieving the consistency???

 

On an interesting side note, a few weeks ago i was in a hotel in the US and saw the hotels menu from 1966. Not much had changed in terms of the style of food, but the prices were interesting, and why inflation and growth of the trading account is so important if you wish to make a living out of trading over the long term, and be able to do it 20 years down the track.

Price examples went from coffee 20c, to $2, main meals (two courses) $4.50 to $40....iel roughly a ten fold increase.....so think how much a cup of coffee may be in 40 years, especially if you are 20-30 years old now......scary.

point being - if you cannot grow the account as well as make a living on it - ultimately you end up going backward in real terms.

[BlowFish 10]

I am not sure what you mean by "I am not that accurate"? (by the context I guess you use larger stops?) Do you have a positive expectancy? If not it dosen''t matter how much capital you have. The figures in your previous example are barely profitable that is why they do not work, not because of under capitalisation.

 

Let me put it another way If you can extract about a point a day from the markets consistently (over the months) you will be able to pay yourself pretty much what you like in about a year. Obviously if your starting account size is not rage enough to trade 1 contract then you can't play.

 

You should probabbly not adjust stops and targets based on account size! Sure account size might determine the size of swings you focus on but you should pick stops and targets that work best for your approach (I favour market structure). Adjust position size to control risk. If you can not afford a 1 lot then you need to raise more or to look at another instrument (maybe spyders or something).

[MightyMouse 12]

I am not sure what you mean by "I am not that accurate"? (by the context I guess you use larger stops?) Do you have a positive expectancy? If not it dosen''t matter how much capital you have. The figures in your previous example are barely profitable that is why they do not work, not because of under capitalisation.

 

Let me put it another way If you can extract about a point a day from the markets consistently (over the months) you will be able to pay yourself pretty much what you like in about a year. Obviously if your starting account size is not rage enough to trade 1 contract then you can't play.

 

You should probabbly not adjust stops and targets based on account size! Sure account size might determine the size of swings you focus on but you should pick stops and targets that work best for your approach (I favour market structure). Adjust position size to control risk. If you can not afford a 1 lot then you need to raise more or to look at another instrument (maybe spyders or something).

 

I do not achieve 60% accuracy in average on my trades thus far its that simple.

 

I do use large stops, but also large targets. Achieving 60% is pretty tough to do if you are targeting more than a 1:1 R/R.

 

If you have learned how to pull a point out of the market everyday per contract traded then you're on your way to the riches you seek. That would be about 1000 a month per contract traded.

 

If you can figure out how to pull a tick out of the markets everyday, you'll be on your way too. The lure of such simplicity has drained many accounts.

[Tams 20]

...

If you have learned how to pull a point out of the market everyday per contract traded then you're on your way to the riches you seek. That would be about 1000 a month per contract traded.

....

 

that's not a fair correlation...

 

if you use a wide stop, and enough patience...

you'll have a good chance of hitting a 1 pt profit.

 

but that does not mean you can trade.

sooner then later, the market will take back what you stole, plus some.

[MightyMouse 12]

that's not a fair correlation...

 

if you use a wide stop, and enough patience...

you'll have a good chance of hitting a 1 pt profit.

 

but that does not mean you can trade.

sooner then later, the market will take back what you stole, plus some.

 

That is exactly why accounts get drained: taking too large a risk, with too little a reward and a poor expectancy.

[BlowFish 10]

I do not achieve 60% accuracy in average on my trades thus far its that simple.

 

I do use large stops, but also large targets. Achieving 60% is pretty tough to do if you are targeting more than a 1:1 R/R.

 

If you have learned how to pull a point out of the market everyday per contract traded then you're on your way to the riches you seek. That would be about 1000 a month per contract traded.

 

If you can figure out how to pull a tick out of the markets everyday, you'll be on your way too. The lure of such simplicity has drained many accounts.

 

Actually there is an argument that loosing sight of that simplicity drains more accounts

 

Sure taking a tick consistently is not a bad place to be, it essentially means that you are a break even trader which is a much better place than a losing trader.

 

Risking 8 ticks to make 8 ticks with 60% winners sounds good to me providing you are well enough capitalised that you can trade with a RoR that you find acceptable. 10 trades per day yields 4 points on average (ES). Commission would wipe out 1 point. 5 trades still works too (1.5 points net).

 

Even risking 2 or 3 ticks to make 2 or 3 ticks can work but obviously getting your costs down becomes pretty important. You would probably need to do more round turns 'scalping' too.

[MightyMouse 12]

Actually there is an argument that loosing sight of that simplicity drains more accounts

 

Sure taking a tick consistently is not a bad place to be, it essentially means that you are a break even trader which is a much better place than a losing trader.

 

Risking 8 ticks to make 8 ticks with 60% winners sounds good to me providing you are well enough capitalised that you can trade with a RoR that you find acceptable. 10 trades per day yields 4 points on average (ES). Commission would wipe out 1 point. 5 trades still works too (1.5 points net).

 

Even risking 2 or 3 ticks to make 2 or 3 ticks can work but obviously getting your costs down becomes pretty important. You would probably need to do more round turns 'scalping' too.

 

Blowfish,

 

Risking 8 to make 8 at 60% with a tick of slippage, nets you about 3 bucks a contract. That is if you strickly follow your 8 to make 8 plan. So, taking 10 trades, you will make $30 a day and not 150. $30 is better than losing.

 

When you enter buy limit and sell limit orders, you are giving a tick on at least 1 side of the transaction. If you are trading small areas, you'll be giving a tick on both sides of the transaction.

 

To get stopped out, price only has to travel 8 ticks against you To make 8 price, generally, has to travel 9 ticks. I have had slippage on es stops too. They happen a lot more often in 6j, 6a, zb, etc.

[BlowFish 10]

Blowfish,

 

Risking 8 to make 8 at 60% with a tick of slippage, nets you about 3 bucks a contract. That is if you strickly follow your 8 to make 8 plan. So, taking 10 trades, you will make $30 a day and not 150. $30 is better than losing.

 

When you enter buy limit and sell limit orders, you are giving a tick on at least 1 side of the transaction. If you are trading small areas, you'll be giving a tick on both sides of the transaction.

 

To get stopped out, price only has to travel 8 ticks against you To make 8 price, generally, has to travel 9 ticks. I have had slippage on es stops too. They happen a lot more often in 6j, 6a, zb, etc.

 

Imho Forget calculating slippage separately. I am not saying ignore it just factor it into your trade management. There is no real advantage dealing it with separately. (though if you are getting a tick on every trade trade thicker markets). So you risk 8 to make 8, emphasis on make.

 

BTW you do not loose a tick on limit orders. Granted it will need substantial trade at your limit price (or maybe to trade through) but you wont get slippage.

 

You will loose the spread on a stop or market order, that is not slippage. Slippage is where for example you place a buy stop at 53 and it fills at 53 quarter. If this happens a lot maybe you are not submitting the orders correctly, you must make sure that you submit them in such a fashion that they are held natively at the exchange. If they are held on your client or at the brokers you will get far far more slippage. Actually quite experienced traders have been known to get this wrong.

 

If you are a 'break out' style trader (and enter on stop) sure you might loose a tick now and then but you really shouldn't that often on the ES (if you are submitting your orders correctly). If you are more a 'buy support' trader then you can enter on limit and loose nothing. Most BO traders welcome a tick slippage in their direction on entry as it usually means that the break out is real!

 

If by trading 'small areas' you are essentially scalping (risk 2 or 3 ot make 2 or 3). In this case you will need to do more round turns (probably a lot) and most importantly pay a lot less commission. Of course the more round turns allows you to negotiate better commission. Infrastructure also becomes more important too.

[sep34 10]

Two ways to go about it, and both ways are easier (specially option2 ) if you have means of supporting your lifestyle independent of trading incom.

 

option1

For those that are well funded ie have enough dough then they can afford lower performing stratgeis as mentioend by other prior posts( I think it was kiwi ) I didnt have time to read all posts.

 

option2

For those that dont have a lot of dough, its still ok... actually it not a handicap, you will be forced to work harder to find a better edge.

Infact for those in this situation, even if its not obvious at the time, you are inherintly in a better position to beome potentially much better traders then those that rely on their larger capital.

You will be forced to find an edge that has-- High probability, High profit expectancy, and Low Risk, they do exist.

You will have to work harder and give most of your free attention to this cause. I dont see this as problem... as long as you dont have the pressure of supporting your self via trading income.

 

option3 ( I dont recomend this for everyone only for those that have been around the markets long enough to understand them and the risks associated)

set aside small amount of money whcih you are 100% ok with losing and using maximum leverage shoot for home runs which can, when you are correct, at minum double your money.

do this long enough until you reach your desired capital.

 

keep in mind there is another side to this coin...

Once again this is not an option suitable for every person.

[MightyMouse 12]

Imho Forget calculating slippage separately. I am not saying ignore it just factor it into your trade management. There is no real advantage dealing it with separately. (though if you are getting a tick on every trade trade thicker markets). So you risk 8 to make 8, emphasis on make.

 

BTW you do not loose a tick on limit orders. Granted it will need substantial trade at your limit price (or maybe to trade through) but you wont get slippage.

 

You will loose the spread on a stop or market order, that is not slippage. Slippage is where for example you place a buy stop at 53 and it fills at 53 quarter. If this happens a lot maybe you are not submitting the orders correctly, you must make sure that you submit them in such a fashion that they are held natively at the exchange. If they are held on your client or at the brokers you will get far far more slippage. Actually quite experienced traders have been known to get this wrong.

 

If you are a 'break out' style trader (and enter on stop) sure you might loose a tick now and then but you really shouldn't that often on the ES (if you are submitting your orders correctly). If you are more a 'buy support' trader then you can enter on limit and loose nothing. Most BO traders welcome a tick slippage in their direction on entry as it usually means that the break out is real!

 

If by trading 'small areas' you are essentially scalping (risk 2 or 3 ot make 2 or 3). In this case you will need to do more round turns (probably a lot) and most importantly pay a lot less commission. Of course the more round turns allows you to negotiate better commission. Infrastructure also becomes more important too.

 

Blowfish, I call any extra movement the market makes that costs you money or that you do not benefit from slippage.

 

If you get into the market and want to get out break even, in most cases the market has to move up a tick for you to do so. If you ever accidentally enter a position and are praying to get out even instead of taking the 1 tick or more loss, you should know what i am talking about. That is part of what I call slippage, in addition to trading 6j, getting your stop hit and realizing that you were filled 5 ticks below.

 

Slippage, as I use the term, is part of the reason why results do not meet expectations when trading live. It is especially important in smaller trading areas since a tick could be 1/8, 1/5, 1/4, or etc of your profit.

 

 

Regards,

 

MM

[BlowFish 10]

Blowfish, I call any extra movement the market makes that costs you money or that you do not benefit from slippage.

 

If you get into the market and want to get out break even, in most cases the market has to move up a tick for you to do so. If you ever accidentally enter a position and are praying to get out even instead of taking the 1 tick or more loss, you should know what i am talking about. That is part of what I call slippage, in addition to trading 6j, getting your stop hit and realizing that you were filled 5 ticks below.

 

Slippage, as I use the term, is part of the reason why results do not meet expectations when trading live. It is especially important in smaller trading areas since a tick could be 1/8, 1/5, 1/4, or etc of your profit.

 

 

Regards,

 

MM

 

Ahh Ok fair enough. I should say that is not really the accepted definition of slippage. Slippage is simply the difference in price between where the order was placed and where it gets filled. Of course you are free to call things what you please but it does not aid communication with other traders In your example (entering and wanting to scratch) most traders would refer to that as paying the spread, yes price has to move a tick in your favour (if the spread is 1 tick) just to get to BE, this is not slippage.

 

Say price is 20 x 21.25 and you buy at market if it fills at 2.25 there is no slippage (even if you just sold short at 20, in fact it is academic where you sold slippage only ever pertains to a single order, not a pair). If however you get filled at 21.50 you have suffered .25 slippage.

 

Whilst you are accounting for everything I think you might be 'cooking the books' a bit. In your 1:1 RR example with a 2 tick stop/target if you are factoring the spread as a separate entity (what you would call slippage) then what you actually have is risk 2 tick to make 1 tick system which is as you say is going to make very little (if anything) with 60% winners.

[sicktrader 10]

Nevermind, couldn't get the video to work.

Edited April 20, 2010 by sicktrader

[MightyMouse 12]

Ahh Ok fair enough. I should say that is not really the accepted definition of slippage. Slippage is simply the difference in price between where the order was placed and where it gets filled. Of course you are free to call things what you please but it does not aid communication with other traders In your example (entering and wanting to scratch) most traders would refer to that as paying the spread, yes price has to move a tick in your favour (if the spread is 1 tick) just to get to BE, this is not slippage.

 

Say price is 20 x 21.25 and you buy at market if it fills at 2.25 there is no slippage (even if you just sold short at 20, in fact it is academic where you sold slippage only ever pertains to a single order, not a pair). If however you get filled at 21.50 you have suffered .25 slippage.

 

Whilst you are accounting for everything I think you might be 'cooking the books' a bit. In your 1:1 RR example with a 2 tick stop/target if you are factoring the spread as a separate entity (what you would call slippage) then what you actually have is risk 2 tick to make 1 tick system which is as you say is going to make very little (if anything) with 60% winners.

 

Risking 2 to make 1 ( as above) with 60% winners and commissions of 4.72 is about a -$12 (guessing at it but I am pretty close) expectancy per contract traded. It simply tells me that this is a lot harder than most people think.

[Trendup_ 10]

Coulb be of interest:

 

Synergistic Trading