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Dear Omega Group,
I would like to suggest a way of HOW TO WIN A TRADING CONTEST with very
little risk
Here is the vehicle:
Futures Trading Contest: To enter the contest, $10,000 is to be
deposited in a futures trading account at Futures Brokerage, where it is
to be traded by the depositor subject to Futures Brokerage's margin
rules and commission rates. Trading will begin on the first market day
of the year and end on the last market day of the year. The largest
account at the end of the year will be the winner. Futures Brokerage's
margin rules require $5K/SP contract and $1K/US contract (please give me
a break on margins ... I'm using them as I recall them appearing 10-15
years ago, when trading contests were in vogue). Futures Brokerage's
commission rates are diminishing, dependent on number of contracts
traded at once; for example, $35/contract for 1 or 2 contracts traded by
a client at once, and progressively diminishing to $6/contract for 100
or more contracts traded by a client at once.
Here is one way of how to win the contest while hedging one's risk:
1. Have a trading program that has been historically documented to show
a positive annual return trading both the SP and the US markets. For
the sake of simplicity, I will assume that this idealized trading
program achieves its positive annual return as a result of the following
schedule: a 3-trade cycle of 2 successive winning trades followed by one
losing trade, with each trade winning or losing 100 old SP points ($500)
or 8 US points ($250) per contract (that is, on average it wins $500/3 =
$167 for every SP contract traded and $250/3 = $83 for every US contract
traded, exclusive of commissions).
2. Deposit $1 million at Futures Brokerage.
3. Allocate the $1 million equally among 100 $10,000 accounts, Accts. 1
through 100, respectively.
4. Divide the 100 accounts into 2 sets of 50 accounts, Accts 1-50 and
51-100, respectively.
5. Throughout the contest, trade as many contracts as are allowable
under Futures Brokerage's margin rules (for example: for a $10,000
account, trade 2 SP contracts).
6. When the trading program gives its first signal: trade with that
signal on Accts. 1-50; trade against that signal on Accts. 51-100.
Note1: Client will trade 2 x 50 contracts long and 2 x 50 contracts
short, for a total of 200 contracts at once, thus qualifying him for
Futures Brokerage's $6/contract commission rate.
Note 2: Accts. 1-50 will each win $1000 (less $12 commission) on Trade
#1 and thereafter will each contain $10,988. Accts. 51-100 will each
lose $1000 (less $12 commission) on Trade #1 and thereafter will each
contain $8,988.
7. When the trading program gives its second signal: trade with that
signal on Accts. 1-50; trade against that signal on Accts. 51-100.
Note 3: Because of margin rules, client will trade 2 contracts in each
of Accts. 1-50 but only 1 contract in each of Accts. 51-100, for a total
of 150 contracts at once, thus again qualifying him for Futures
Brokerage's $6/contract commission rate.
Note 4: Accts. 1-50 will each win another $1000 (less $12 commission)
on Trade #2 and thereafter will each contain $11,976. Accts. 51-100
will each lose $500 (less $6 commission) on Trade #2 and thereafter will
each contain $8,482.
7. When the trading program gives its third signal (its first losing
signal): trade with that signal on Accts. 1-50; trade against that
signal on Accts. 51-100.
Note 5: Accts. 1-50 will each lose $1000 (less $12 commission) on Trade
#3 and thereafter will each contain $10,964. Accts. 51-100 will each
win $500 (less $6 commission) on Trade #3 and thereafter will each
contain $8,976. The system as a whole will show net profits of 50 x
$10,964 plus 50 x $8,976 less $1,000,000 = ($3,000) after Trade #3.
8. Repeat the foregoing process indefinitely. With this size traded,
each of Accts. 1-50 will net win $988 every 3 trades: each of Accts.
51-100 will net lose $494 every 3 trades; so the system, for every cycle
of 3 trades hereafter at this stage, will net win $494 x 50 = $24,700,
averaging $3,087.50 profits/trade.
Note 6: At the end of of Trade #6: Accts 1-50 will each contain
$11,952; Accts. 51-100 will each contain $8,482; and the system as a
whole will show profits of 50 x $11,952 plus 50 x $8,482 less $1,000,000
= $21,700.
9. When Accts. 1-50 each exceed $15,000, begin trading 3
contracts/account and continue adding another contract/account each time
that account wins another $5,000.
10. When Accts. 51-100 each fall below $5,000 (thus making them unable
to trade SP, due to margin rules):
a) Divide those 50 accounts into 2 sets of 25 accounts, Accts. 51-75
and Accts. 76-100, respectively. Trade Accts. 51-75 like old Accts.
1-50 were traded; trade Accts. 76-100 like old Accts. 51-100 were
traded. Here, however, trade US instead of SP; like with SP, trade US
using maximum number of contracts given margin requirements.
b) Divide Accts. 1-50 into 2 sets of 25 accounts, Accts. 1-25 and
Accts. 26-50, respectively. Trade Accts. 1-25 like old Accts. 1-50 were
traded; trade Accts. 26-50 like old Accts. 51-100 were traded. Continue
to trade SP using maximum number of contracts given margin requirements.
11. When Accts. 26-50 each fall below $5,000:
a) Divide those 25 accounts into 2 sets of accounts, Accts. 26-37 and
Accts. 38-50. Trade Accts. 26-37 like old Accts. 1-50 were traded;
trade Accts. 38-50 like old Accts. 51-100 were traded. Continue with
all these accounts to trade US instead of SP.
b) Divide Accts. 1-25 into 2 sets of accounts, Accts. 1-12 and Accts.
13-25, respectively. Trade Accts. 1-12 like old Accts. 1-50 were
traded; trade Accts. 13-25 like old Accts. 51-100 were traded. Continue
to trade SP.
12. Continue to repeat the foregoing process. In time, the net result
will be as follows:
A. Acct. 1 will become enormous, particularly in contrast to its
initial $10,000 size. It will effectively contain client's initial $1
million plus his combined trading profits over all his 100 accounts.
Beginning at $10,000 and growing to over $1 million, Acct. 1 will likely
win the contest.
B. Accts. 2-100 will each contain below the minimum US margin
requirements, thus resulting in their cessation of trading.
C. To the extent that the client wins a large number of dollars during
the contest (that is, that Acct. 1 now contains more than client's
initial $1 million deposit less the combined amounts remaining in Accts.
2-100), that result is due in part to the success of his trading program
as will as his execution of it and in part to his initially having begun
the contest with a large number of dollars. Who will question that
winning, for example, $100,000 beginning with $1,000,000 is easier than
winning $100,000 beginning with $10,000?
Sincerely,
Richard Josslin
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