53 replies to this topic

[IndexTrader]

I am very skeptical about trading futures with any account less than 150K. You could get a drawdown of as much as 500$ or 1000$, which only sounds apt for an account the size of ~ 150k$. And considering how they toss the futures up and down, the drawdowns can come within no time. I confess that I cannot control emotion of being depressed, when I see a loss of more than 1000$ on a single day or so. I have paper traded futures, but very well decided that trading futures is not for me. My paper account is at 100% gain, in 1 1/2 year - I have only done 15 - 20 round trips, all are short 2 - 3 day trades. But, my brain tells me that futures trading is not apt for my real money account. Sleep is another factor. I wish to sleep well and I know that is not possible with futures trading.

The value of a mini S&P futures contract (ES) is currently about $55,000. So the contract trades like $55,000 worth of stock would trade. And BTW, $55,000 worth of the S&P 500 is less volatile than most of the popular trading stocks. A $500 move in the S&P500 is around 1%, which stocks do all the time.

So does it take $150K to trade $55K? I don't think it does. If you're that conservative though then certainly that's how you should do it. I've been trading the index futures now since their beginning about 30 years ago. Generally speaking I don't get more leveraged than about $20-$25K per contract...and alot of that depends on how volatile we are. Right now with volatility above 40%, I've raised my margin per contract. Then too, I'm 66 now, so I'm much more conservative now than I was back when I first started trading. Minimum margin BTW is $5000 right now.

I trade ES futures for alot of different reasons. Originally way back when I traded options, where I nearly lost my money several times, due to time premium decay, or getting the direction wrong. I came to futures from that, and for me it was a terrific product area, it got me away from options. I have rarely traded options over the last 30 years, only occasionally typically when I can't get short a stock. When I first started trading futures, I started with an account of $20K. That was a relatively large beginning account at the time (30 years ago). I like the idea that I get a preferential tax treatment (60% of gains are long term). Today I like the fact that I can trade 24 hours a day. In the ES it is very liquid with little slippage or execution cost, and commissions are low.

If I were young and starting again, I would be comfortable trading the ES with $20K. I'd start trading one. Sure, if you lose $1000 it's a large percentage of your account (5%). You don't have to lose $1000 (or more). You can use stop losses. But keep in mind, $$20K is roughly like 50% margin, the amount of margin you can use in stocks. And again, trust me, stocks are more volatile than the index for the most part. Go buy 2000 shares of MSFT at $25. Take a look at your daily flucuations. One stock I trade frequently is NEM...try 1000 shares of NEM see how your volatility is.

IT

[manuj]

So IT - after 30+ years of trading - did you multiply $20K many times over? Do you think a progressive and hard working person can make the same amount at a well paying corporate job? In other words - treating yourself as a case study - is trading a more lucrative profession than any other conventional job?

[TechMan]

In other words - treating yourself as a case study - is trading a more lucrative profession than any other conventional job?

Good question that got me curious too.

Hi Nav,

I've noted that you scale-out in thirds on your trades. Is this not in effect some type of profit target? Just trying to understand. TIA

Later,
Wu

Good question for clarification.

[IndexTrader]

So IT - after 30+ years of trading - did you multiply $20K many times over?

Do you think a progressive and hard working person can make the same amount at a well paying corporate job?

In other words - treating yourself as a case study - is trading a more lucrative profession than any other conventional job?

That's an interesting question. My Dad was a high level corporate executive with an oil company. So was my Grandfather. Then I have 2 brothers both executives with oil companies, both recently retired. So using them as my perspective of corporate jobs, they were very well paid, and by retirement had substantial net worth, well into 7 figures (except for my Grandfather, he was a little too far back, but he did very well for his era). Their lives after college were stable, moving steadily forward financially.

My career on the other hand has been more volatile. I've had my ups and downs. In fact at one point I decided to start buying rental real estate so that I could stabilize my income. My real estate did very well for me, although recently is took approximately a 50% haircut in terms of value. The income though has remained the same. In trading I withdrew substantial amounts of money to live on, to buy real estate, etc. I also added money at a few points. So really it's impossible to come up with a percentage. But numbers like 20% for instance have no meaning to me. I couldn't eat percentages. I had to make a certain amount of cash every year to live, and then additional cash to keep my account growing. I did that, but it was unevenly. Certainly I wouldn't describe it as "stable" like my father or my brothers for instance. I still trade like that...I still trade to make cash, not for percentages.

I mention that because trading is not for everyone. It has it's ups and downs. And because of that, I would suggest anyone contemplating trading as a career carefully evaluate their personality and psychology, to see if they can deal with the uncertainty that is inherent in this profession.

That said, from my perspective, I think a good trader can do very well. Just remember that I have seen many of my fellow traders fail over the years.

Hope that answers your question.

IT

[TechMan]

Then, in my book, you're a successful trader.

That's an interesting question. My Dad was a high level corporate executive with an oil company. So was my Grandfather. Then I have 2 brothers both executives with oil companies, both recently retired. So using them as my perspective of corporate jobs, they were very well paid, and by retirement had substantial net worth, well into 7 figures (except for my Grandfather, he was a little too far back, but he did very well for his era). Their lives after college were stable, moving steadily forward financially.

My career on the other hand has been more volatile. I've had my ups and downs. In fact at one point I decided to start buying rental real estate so that I could stabilize my income. My real estate did very well for me, although recently is took approximately a 50% haircut in terms of value. The income though has remained the same. In trading I withdrew substantial amounts of money to live on, to buy real estate, etc. I also added money at a few points. So really it's impossible to come up with a percentage. But numbers like 20% for instance have no meaning to me. I couldn't eat percentages. I had to make a certain amount of cash every year to live, and then additional cash to keep my account growing. I did that, but it was unevenly. Certainly I wouldn't describe it as "stable" like my father or my brothers for instance. I still trade like that...I still trade to make cash, not for percentages.

I mention that because trading is not for everyone. It has it's ups and downs. And because of that, I would suggest anyone contemplating trading as a career carefully evaluate their personality and psychology, to see if they can deal with the uncertainty that is inherent in this profession.

That said, from my perspective, I think a good trader can do very well. Just remember that I have seen many of my fellow traders fail over the years.

Hope that answers your question.

IT

[voecklen]

I trade for a living. I have gone through various dilemmas and conflicts before settling down on what works for me. To me, having a fixed goal on a trade, either a price target or profit target has not worked well. Having a daily profit goal has not worked either. Having a profit target or price target would mean cutting short on big trending moves and expecting more during a consolidation moves. Both leads to frustration - in the former case the frustration of missing a big move and in the latter case not achieving your set profit goals. Once you start accepting whatever the market gives i.e riding a move without preset expectations or bias, life gets easier. Once expectations and opinions about markets are taken out of the equation, it's becomes easier to ride the big moves and also to accept the losses in choppy zone. My 5 cents...

Hi Nav,

I've noted that you scale-out in thirds on your trades. Is this not in effect some type of profit target? Just trying to understand. TIA

Later,
Wu

I've done some reading on the Adam Theory, which Nav discussed in a post yesterday on price action. While I fully agree with Nav and the Adam Theory re: price action as being the only true indicator, the Adam Theory doesn't suggest to take profits until the trade turns against you. It just suggested to move your stops in the direction of the trade. I see nothing regarding scaling out. (Scaling in yes, but not out). I'm making the assumption AT has influenced your thinking. Perhaps my reading was too brief. Should you answer could you answer not only why you chose to do so but also how that may be in alignment or nonalignment with AT. Thanks.

Edited by voecklen, 02 October 2011 - 01:43 PM.

[manuj]

So IT - after 30+ years of trading - did you multiply $20K many times over?

Do you think a progressive and hard working person can make the same amount at a well paying corporate job?

In other words - treating yourself as a case study - is trading a more lucrative profession than any other conventional job?

That's an interesting question. My Dad was a high level corporate executive with an oil company. So was my Grandfather. Then I have 2 brothers both executives with oil companies, both recently retired. So using them as my perspective of corporate jobs, they were very well paid, and by retirement had substantial net worth, well into 7 figures (except for my Grandfather, he was a little too far back, but he did very well for his era). Their lives after college were stable, moving steadily forward financially.

My career on the other hand has been more volatile. I've had my ups and downs. In fact at one point I decided to start buying rental real estate so that I could stabilize my income. My real estate did very well for me, although recently is took approximately a 50% haircut in terms of value. The income though has remained the same. In trading I withdrew substantial amounts of money to live on, to buy real estate, etc. I also added money at a few points. So really it's impossible to come up with a percentage. But numbers like 20% for instance have no meaning to me. I couldn't eat percentages. I had to make a certain amount of cash every year to live, and then additional cash to keep my account growing. I did that, but it was unevenly. Certainly I wouldn't describe it as "stable" like my father or my brothers for instance. I still trade like that...I still trade to make cash, not for percentages.

I mention that because trading is not for everyone. It has it's ups and downs. And because of that, I would suggest anyone contemplating trading as a career carefully evaluate their personality and psychology, to see if they can deal with the uncertainty that is inherent in this profession.

That said, from my perspective, I think a good trader can do very well. Just remember that I have seen many of my fellow traders fail over the years.

Hope that answers your question.

IT

Success can be measured in two ways: material and abstract. Taking those 2 measures:

- Is your networth more or relatively close to your handsomely paid siblings?

- Your response clearly alludes to the lack of security but did the excitement and glamour of trading fill that gap; enough that you feel in the pursuit of happiness you stand at the same level as your siblings?

Edited by manuj, 02 October 2011 - 01:47 PM.

[DrWu]

I trade for a living. I have gone through various dilemmas and conflicts before settling down on what works for me. To me, having a fixed goal on a trade, either a price target or profit target has not worked well. Having a daily profit goal has not worked either. Having a profit target or price target would mean cutting short on big trending moves and expecting more during a consolidation moves. Both leads to frustration - in the former case the frustration of missing a big move and in the latter case not achieving your set profit goals. Once you start accepting whatever the market gives i.e riding a move without preset expectations or bias, life gets easier. Once expectations and opinions about markets are taken out of the equation, it's becomes easier to ride the big moves and also to accept the losses in choppy zone. My 5 cents...

Hi Nav,

I've noted that you scale-out in thirds on your trades. Is this not in effect some type of profit target? Just trying to understand. TIA

Later,
Wu

I've done some reading on the Adam Theory, which Nav discussed in a post yesterday on price action. While I fully agree with Nav and the Adam Theory re: price action as being the only true indicator, the Adam Theory doesn't suggest to take profits until the trade turns against you. It just suggested to move your stops in the direction of the trade. I see nothing regarding scaling out. (Scaling in yes, but not out). I'm making the assumption AT has influenced your thinking. Perhaps my reading was too brief. Should you answer could you answer not only why you chose to do so but also how that may be in alignment or nonalignment with AT. Thanks.

If this question is directed to me (I'm unsure after several reads), I'm unfamiliar with AT.

[voecklen]

No. Sorry. Question was for Nav.

[IndexTrader]

So IT - after 30+ years of trading - did you multiply $20K many times over?

Do you think a progressive and hard working person can make the same amount at a well paying corporate job?

In other words - treating yourself as a case study - is trading a more lucrative profession than any other conventional job?

That's an interesting question. My Dad was a high level corporate executive with an oil company. So was my Grandfather. Then I have 2 brothers both executives with oil companies, both recently retired. So using them as my perspective of corporate jobs, they were very well paid, and by retirement had substantial net worth, well into 7 figures (except for my Grandfather, he was a little too far back, but he did very well for his era). Their lives after college were stable, moving steadily forward financially.

My career on the other hand has been more volatile. I've had my ups and downs. In fact at one point I decided to start buying rental real estate so that I could stabilize my income. My real estate did very well for me, although recently is took approximately a 50% haircut in terms of value. The income though has remained the same. In trading I withdrew substantial amounts of money to live on, to buy real estate, etc. I also added money at a few points. So really it's impossible to come up with a percentage. But numbers like 20% for instance have no meaning to me. I couldn't eat percentages. I had to make a certain amount of cash every year to live, and then additional cash to keep my account growing. I did that, but it was unevenly. Certainly I wouldn't describe it as "stable" like my father or my brothers for instance. I still trade like that...I still trade to make cash, not for percentages.

I mention that because trading is not for everyone. It has it's ups and downs. And because of that, I would suggest anyone contemplating trading as a career carefully evaluate their personality and psychology, to see if they can deal with the uncertainty that is inherent in this profession.

That said, from my perspective, I think a good trader can do very well. Just remember that I have seen many of my fellow traders fail over the years.

Hope that answers your question.

IT

Success can be measured in two ways: material and abstract. Taking those 2 measures:

- Is your networth more or relatively close to your handsomely paid siblings?

- Your response clearly alludes to the lack of security but did the excitement and glamour of trading fill that gap; enough that you feel in the pursuit of happiness you stand at the same level as your siblings?

Sorry about that...I meant to answer the net worth question and got off topic talking about the 50% haircut I took in real estate. I would estimate that my net worth is somewhat similar to my brothers. They had things like stock options, 401Ks that the company matched, various ltypes of insurance, etc etc. I had none of those so I had a lot to overcome.

To make something clear, I'm not the most successful trader I know, and I've know a number of successful traders personally. But my brothers aren't the most successful corporate executives either. Look at some of the packages some of these CEOs leave with...pretty fancy money. I think the point is that you can do well in trading if you're good at it.

In my case, trading was something I have loved since I was 20 and I opened my first brokerage account with a phoney drivers license. I couldn't have done anything else. I would have been a lousy corporate executive. And I would have been unhappy doing it. So my thought is that you make your choice based on what you love, what you think suits you. Money is secondary to that. Sky is the limit in trading....there have been those who have proved that. Generally speaking the traders that make the most trade with other people's money. I tried that at one point in my life, and didn't like it. I found that if there was a loss, people tend to whine about it. It put a pressure on me I didn't like.

IT