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Hello Justin,
Your questions imply that there is an easier way to make a living and
I suspect there is. If you want to make 5-10% on your capital then
give it to a professional who, most of the time, can do that but don't
expect much more and, at least in recent times you may get a lot less.
If you are expecting as a futures trader to make
40% or better return per year on your available capital you have to
look around and ask yourself -- Do you know anyone else, professional
money manager or trader who is consistently doing that? They are few
and far between. But if your business plan says that is what you need
to do to be successful then if you are a systems or rules type trader
you can at least back test your rules and see if it is even possible
with your current trading rules. And, even if back testing shows it
is, do you have the capital and fortitude to trade your rules. If you
can honestly answer yes then proceed, if not don't waste your time and
money trading you have already shown yourself it won't work.
In my own case, I have traded futures for six years, full time as a
business since the start of 2001. I started out trading everything to
build up my knowledge but slowly narrowed my focus to stock index
futures, currency futures and bonds. I am a systems trader and only
trade rules that have shown on a significant back test (being careful
not to curve fit) to perform. Even then the markets are constantly
changing and what worked yesterday doesn't work forever. A good
example of this is Mark Brown's Oddball system. It worked like a cash
register for several years and then the market changed and it stopped.
However, I learned a lesson from that system which I have used in all
my systems since. A successful system should have very few variables, 3
at the max. Anything more than that is probably curve fit and won't
continue to perform in the future.
Secondly I don't use the technical indicators built into the various
software. For me they have never consistently worked. Instead what I
do is look for some simple relationship such as the oddball system's
use of advancing issues. Other examples might be the relationship of
the daily close to the next day's open, today's open to close, the
size and direction of the overnight gap,% of up or down volume, etc.
Once I find something promising I then take the back test results
which should have at least 100 or more trades and using excel, resort
the gains and losses to get a better idea of the possible maximum
draw down. I also generally assume that the draw down in the future
will be at least twice that shown on the back test. If these tests
show the system is tradable then I go forward recognizing the draw down
I know I am going to face. Obviously if my capital or stomach can't
handle the expected draw down, the system isn't tradable, at least for
me even if it is highly profitable.
I look for systems that have a large profit expectancy. That means
they must trade often (usually at least once every other day) and have
a reasonably large average trade profit.
This type of trading does require a real time feed but nothing more
than an e-signal with a minimum number of symbols. So far this method
of trading futures has worked for me but not without some dry spells
and some painful drawdowns.
Even given the simplicity of my systems and the fact that I work at
trading full time everyday, I sometimes go for a couple of months before
my testing comes up with a new successful system. Doing it part time
would be even harder.
Lastly, if your trading is successful but you just don't have enough
capital to make a decent living, your alternative is to manage other's
money as well until you can grow your own capital to the size you
need.
That's how it is with me, hope this helps.
Thursday, September 30, 2004, 3:26:14 PM, you wrote:
JF> This is a little OT, in pure relation to Tradestation, but could I tap
JF> the collective knowledge of the group in relation to futures as a %
JF> of an overall investment strategy.
JF> I've been bashing away at futures technical analysis for ~ 10 years
JF> (part time) as 100% of my "investment" strategy. I'm getting to
JF> the point I simply have to accept my time is being poorly spent on
JF> an "investment" where few make money, and my time would be best
JF> spent on something where almost everyone (within reason) makes
JF> money, such as property, bonds etc.
JF> I'm starting to realise most people go bad in futures not because
JF> of losses (within reason) but because they aren't making enough
JF> money to cover their day-to-day living costs (under capitalised
JF> business), and end up gutting the trading account for rent/food etc.
JF> Any business that's starving the cash flow to cover costs, demise is
JF> almost inevitable.
JF> I see the only way forward in trading would be to wrap a business
JF> plan around trading and raise 100k+ (25k for quality data feed,
JF> 50k for living (house, food, kids etc) & 25k to fund an account).
JF> But logic would dictate if I can get 100k together that I can loose
JF> without ramifications, why wouldn't I simply continue doing that
JF> activity that brought in the 100k in the first place!
JF> I use to scorn property, bonds and the like as un-sophisticated
JF> investors, but in hind site, they are guys who little by little have
JF> now accumulated reasonable wealth, while most of the futures
JF> crowd is happy just to break even. I'm reminded a little of the
JF> tortes and the hair, the tortes in this scenario has collected his
JF> monthly rent cheques and is now sitting on large capital gains,
JF> while the hare with his live data feeds, formulas, systems &
JF> indicators, has done a lot of running around, but gone nowhere.
JF> I did some tests the other day, running some long term moving
JF> averages over the S&P500 index will typically net ~ 10k/year,
JF> perhaps that's how I should view futures, as a small lifestyle subsidy,
JF> but stop trying to make a "future" out of it.
JF> I'm obviously not the first to reach this point and was interested
JF> in what paths others have taken. Did you reduce your % futures
JF> exposure (in both time & money terms), explore other markets?
JF> options, currencies, stocks etc.? Or give up the game all together
JF> and go into something else? (in which case you probably wouldn't
JF> be on this list :) )
JF> All input welcomed.
JF> Kind regards,
JF> Justin
--
Best regards,
Roger mailto:mailrs@xxxxxxxxxx
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