This is a serious question, so please try to answer seriously. I'm looking for actual information, even secondhand, rather than speculation.
A little history, to show that I'm not a noob. I started day-trading ES futures, as everyone does, because of the enormous leverage. I started out thinking, "If I can just make 4 points a day, consistently, I will be a millionaire within a year."
Of course, that never happened. I traded a mechanical system that I bought off the Internet, and although it always looked 80-85% profitable on paper, in practice I lost at least 60-70% of the time.
It took my years to figure out how that was possible, during which time I was the textbook definition of insane (as in, I kept doing the same thing over and over, expecting a different result each time). But eventually, after losing consistently for 3 years, and more than $100,000, I realized how stupid I was, and I began from scratch, looking at every move, to see if there were commonalities, patterns - anything.
Fast forward to today, months and hundreds of hours of work later. I have developed a purely mechanical system (okay, there is some judgment, about things I can't properly quantify, such as support and resistance, but which are relatively easy to spot visually) for daytrading the ES that is 90% profitable - that is, it wins 9 times out of every 10 signals. You don't have to believe me - I barely believe it myself - but just assume this is true. The goal is 2 points, and the stop is 2 points. The downside is that there are very few clear, tradeable signals each day - perhaps 3-4 on most days, and sometimes 0-1, so it's mostly a lot of boredom, followed by brief flurries of action and stressing out.
I have traded this system successfully for the past 2 weeks, winning 11 and losing 3 trades (2 of which, incidentally, were mistakes). I trade with a $500 margin, so after 5 wins I gain another contract (if I trade with only the minimum, which I do). I have gone from a start of 2 contracts and $1,000 in equity to 6 contracts and $3,500 in equity, and on Monday I start with 7 contracts.
I don't know what the maximum position is for daytrading ES futures, but my broker states that their largest individual client trades 700 contracts at a time. Based on the liquidity of the trades I've taken, and backtesting the system, I believe that is possible with my system.
Now, here's my question. Starting from 2 contracts and $1,000, with only $500 margin per contract (that increases to $1,000 per contract after 50 contracts, and I think $2,000 per contract after 100 contracts), winning, say, 4 net trades of 2 points/$100 each per week, I calculate that I can compound my way up to 700 contracts and $1,000,000 in equity within a year.
But that would mean my equity grows from $1,000 to $1,000,000, a 1000X increase, or a 100,000% annual return. That seems ridiculous. The most I've ever heard of is Larry Williams, who is famous for making 10,000% in commodities in 1 year (I believe it was properly documented, part of a competition, and duplicated by his daughter - citing Wikipedia).
I know it's possible, in that it's mathematically provable, given the low margins. As far as I can tell, the liquidity is there. My broker assured me, with what I figured was a smirk in her voice, that if I can handle it, and I have the equity, I can trade up to 700 contracts with roughly (she wasn't specific about margins above 100 contracts) the margins indicated above. Let's assume, for argument' sake (I know no one out there believes me) that my system has a 90% win rate, and that I WILL win 4 net 2-point winners per week.
Has anyone ever done this before? Has anyone ever heard of anyone doing this? If this isn't possible, where is the flaw? What will I have to do differently as I increase my trade sizes? Is there an inevitable contract size after which I am psychologically guaranteed to go clinically insane, and blow up my account?
Any answer, again based on actual experience or overheard gossip, is much appreciated.
A little history, to show that I'm not a noob. I started day-trading ES futures, as everyone does, because of the enormous leverage. I started out thinking, "If I can just make 4 points a day, consistently, I will be a millionaire within a year."
Of course, that never happened. I traded a mechanical system that I bought off the Internet, and although it always looked 80-85% profitable on paper, in practice I lost at least 60-70% of the time.
It took my years to figure out how that was possible, during which time I was the textbook definition of insane (as in, I kept doing the same thing over and over, expecting a different result each time). But eventually, after losing consistently for 3 years, and more than $100,000, I realized how stupid I was, and I began from scratch, looking at every move, to see if there were commonalities, patterns - anything.
Fast forward to today, months and hundreds of hours of work later. I have developed a purely mechanical system (okay, there is some judgment, about things I can't properly quantify, such as support and resistance, but which are relatively easy to spot visually) for daytrading the ES that is 90% profitable - that is, it wins 9 times out of every 10 signals. You don't have to believe me - I barely believe it myself - but just assume this is true. The goal is 2 points, and the stop is 2 points. The downside is that there are very few clear, tradeable signals each day - perhaps 3-4 on most days, and sometimes 0-1, so it's mostly a lot of boredom, followed by brief flurries of action and stressing out.
I have traded this system successfully for the past 2 weeks, winning 11 and losing 3 trades (2 of which, incidentally, were mistakes). I trade with a $500 margin, so after 5 wins I gain another contract (if I trade with only the minimum, which I do). I have gone from a start of 2 contracts and $1,000 in equity to 6 contracts and $3,500 in equity, and on Monday I start with 7 contracts.
I don't know what the maximum position is for daytrading ES futures, but my broker states that their largest individual client trades 700 contracts at a time. Based on the liquidity of the trades I've taken, and backtesting the system, I believe that is possible with my system.
Now, here's my question. Starting from 2 contracts and $1,000, with only $500 margin per contract (that increases to $1,000 per contract after 50 contracts, and I think $2,000 per contract after 100 contracts), winning, say, 4 net trades of 2 points/$100 each per week, I calculate that I can compound my way up to 700 contracts and $1,000,000 in equity within a year.
But that would mean my equity grows from $1,000 to $1,000,000, a 1000X increase, or a 100,000% annual return. That seems ridiculous. The most I've ever heard of is Larry Williams, who is famous for making 10,000% in commodities in 1 year (I believe it was properly documented, part of a competition, and duplicated by his daughter - citing Wikipedia).
I know it's possible, in that it's mathematically provable, given the low margins. As far as I can tell, the liquidity is there. My broker assured me, with what I figured was a smirk in her voice, that if I can handle it, and I have the equity, I can trade up to 700 contracts with roughly (she wasn't specific about margins above 100 contracts) the margins indicated above. Let's assume, for argument' sake (I know no one out there believes me) that my system has a 90% win rate, and that I WILL win 4 net 2-point winners per week.
Has anyone ever done this before? Has anyone ever heard of anyone doing this? If this isn't possible, where is the flaw? What will I have to do differently as I increase my trade sizes? Is there an inevitable contract size after which I am psychologically guaranteed to go clinically insane, and blow up my account?
Any answer, again based on actual experience or overheard gossip, is much appreciated.