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I like the idea
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> From: Richard Josslin <oldfogey@xxxxxxxxxxx>
> To: omega-list@xxxxxxxxxx
> Subject: How to Win a Trading Contest
> Date: 06 July 1998 21:33
>
> 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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