trading size

[gareth1978]

Hey all,

I have a question regarding, for want of a better term, 'trading size'.

I am looking to get back into trading early next year - it will be my second attempt, but I'll be much better capitalised this time around.

I am aiming to have $250k working capital. The problem I have, though... is previously I was trading emini futures very short term, so my stops were very tight. This allowed me to only risk <= 1% of my capital on each trade, which was within my risk tolerance with a $10k account.

This time around, say I was to use the same trading method... lets assume I am trading 1 ES contract per $10k of capital. Having $250k means I can trade 25 contracts. This is where my problem/confusion lies... is it really going to be possible for me to trade this many contracts easily? Could I run into problems with not getting orders filled at the price I want, etc?

Also, the ES trades pretty deep, but I also traded the ER2 and YM (and preferred them to ES), which are much thinner. I can also use tighter stops and the ticks are cheaper, so I would potentially be trading more than 25 cars on these two.

Obviously if I am successful, I would also like to scale up... just how realistic is it to be trading 30, 40, 50 ES contracts very short term like this? (I am talking about 2-3 ticks stops and 5-6 tick exits).

What I want, is to make a decision about my future in trading right now. I want to decide which markets/timeframes I should be trading that will allow me to scale up to very large size. I'm not sure short term emini trading allows me to do this. Could anyone offer advice?

Maybe I should be looking at longer term trades with bigger stops, which would mean I'd be trading less contracts. Maybe I should be trading stocks instead? I don't know. Never traded stocks before.

Any advice on this topic would be much appreciated. I don't want to become a successful short-term trader, only to have to learn a new style a couple years down the track. I would like to start on a path that I can stick to long term, since the longer I trade a certain market/method, the better I'll become at it.

Cheers,

Gareth

PS. When I do start trading with this 250k account, I will be trading 1 contract for at least 6-12 months so that I can prove myself a profitable trader. Then I'll be increasing in size very slowly

 

[ronblack]

Obviously if I am successful, I would also like to scale up... just how realistic is it to be trading 30, 40, 50 ES contracts very short term like this? (I am talking about 2-3 ticks stops and 5-6 tick exits).

I'm sure the "big players" won't turn down your contribution of 250k.

Ron

 

[gareth1978]

Sorry, you've lost me Ron. Could you explain?

Thanks,

Gareth

 

[gareth1978]

Are the two replies I've had to my post so far some kind of inside joke?

Does anyone have any constructive advice to give me on this matter, seems like a pretty simple question - and this is the beginners forum.

Gareth

 

[peto]

Hi Gareth. Taking you and your questions at face value and a giving a direct answer, I should have thought e-mini's would be perfectly capable of taking you up to "very large size" with short term trading. The es in particular usually trades with several hundred contracts available on the bid and the ask (quarter point spread), so you can buy or sell up to this size in a fraction of a second without slippage.

The trouble with your post is that there is nothing in it which suggests that you have a profitable strategy. Your question is a little like an athletic schoolboy asking whether top golfers or top footballers make the most money, because he needs to know which sport he should work on.

If you can find a consistently profitable strategy in futures trading then you have hit the 'grail', it may well elude you for years or even for ever, but whilst trying your 250k will be prey to the other market participants and the brokers, which is what I imagine Ronblack was trying to say.

If and when you can make consistent money in futures,on any time frame or instrument whatsoever, then your way forward will become apparent. This should be your starting point.
Pete

 

[gareth1978]

Hi Peto,

Thanks for answering my question.

On the topic of whether I can trade the eminis profitably, or not - I feel that's somewhat irrelevant to the questions I was asking. Maybe I can trade profitably, maybe I can't - you gotta start somewhere, right.

Cheers,

Gareth

 

[new_trader]

Hi Peto,

Thanks for answering my question.

On the topic of whether I can trade the eminis profitably, or not - I feel that's somewhat irrelevant to the questions I was asking. Maybe I can trade profitably, maybe I can't - you gotta start somewhere, right.

Cheers,

Gareth

Gareth, I trade the E-mini contracts and I can assure you that 50 contracts would be absorbed like a drop in the ocean. I see 500, 800, 1000, 2000 lots traded in fractions of seconds. Here is a quick snapshot of the 1st 30 seconds of trading at the open and I have only included trades 10 lots or higher. This is the ESM7.

Date, Time, Volume, Price

"21/05/2007 14:30:00 23 1527.25"
"21/05/2007 14:30:01 241 1527.50"
"21/05/2007 14:30:02 10 1527.50"
"21/05/2007 14:30:02 11 1527.50"
"21/05/2007 14:30:03 362 1527.25"
"21/05/2007 14:30:04 65 1527.50"
"21/05/2007 14:30:05 10 1527.25"
"21/05/2007 14:30:06 250 1527.50"
"21/05/2007 14:30:06 22 1527.25"
"21/05/2007 14:30:07 150 1527.25"
"21/05/2007 14:30:08 40 1527.25"
"21/05/2007 14:30:09 42 1527.50"
"21/05/2007 14:30:10 10 1527.50"
"21/05/2007 14:30:12 30 1527.25"
"21/05/2007 14:30:13 50 1527.50"
"21/05/2007 14:30:15 100 1527.50"
"21/05/2007 14:30:16 25 1527.75"
"21/05/2007 14:30:18 10 1527.25"
"21/05/2007 14:30:22 14 1527.50"
"21/05/2007 14:30:23 166 1527.25"
"21/05/2007 14:30:24 25 1527.00"
"21/05/2007 14:30:25 882 1527.00"
"21/05/2007 14:30:27 10 1527.00"
"21/05/2007 14:30:28 30 1526.75"
"21/05/2007 14:30:29 50 1526.75"
"21/05/2007 14:30:29 50 1526.75"
"21/05/2007 14:30:29 25 1526.75"
"21/05/2007 14:30:30 50 1526.75"

 

[TheBramble]

On the topic of whether I can trade the eminis profitably, or not - I feel that's somewhat irrelevant to the questions I was asking. Maybe I can trade profitably, maybe I can't - you gotta start somewhere, right.

Not at all irrelevant Gareth. Your W:L should directly dictate your position size.

There are many formulas around to help you set the sizing that suits your overall capital, your appetite for risk and your system profitability profile. You need all of these data for any of the formula that are any use.

I suggest you hunt around for these as you'll pick up far more than just that in the process. But as you like direct responses, if your trading system is a loser, and based on your initial comments on your first post in this thread, it probably was (is?), you're better off betting the whole ranch on the first, and only trade.

And although the initial respondent may not have seemed that helpful, you need to look at what you're asking. You seem fixated on size, rather than timeframe, markets, instruments or trading style. Not only is this not simply putting the cart before the horse, it is not knowing that a cart exists.

As you seem to prefer the direct style of communication, I'll amswer you directly as best I can. You will have no problem getting fills on 25 contracts in most market conditions. You need to get a firm grasp on what your risk per trade is and this includes numbers of contracts, obviously. Your risk per trade is going to be unrealistic in markets that are trending strongly. You haven't mentioned your anticiapted reward per trade. This matters a great deal, even and especially when scalping.

One final thing - you propose using the 'same trading method' - don't. It didn't work last time did it.

 

[gareth1978]

new_trader : Thankyou very much for answering my simple question so directly, much appreciated

The Degrees : I'm sorry, but I don't have the time or the inclination to even begin to respond to what you've said.

Gareth

 

[alexander]

Obviously if I am successful, I would also like to scale up... just how realistic is it to be trading 30, 40, 50 ES contracts very short term like this? (I am talking about 2-3 ticks stops and 5-6 tick exits).

Gareth, I think The Degrees is trying to tell you that size cannot be viewed apart the performance of a given strategy. He is correct. Specifically, if your stop is 2 ticks and your exit (profit) 5 ticks then (neglecting commissions) your breakeven success rate is 3 winners out of every 10 trades (I have a link at the end to the formula I used to calculate this number).

Now, if you want a profit factor equal to 2, let's assume that, the required success rate increases to 4.4 winners out of every 10 trades.

For a profit factor equal to 3 the success rate increases to 5.5 winners out of every 10 trades.

Now, factor in commission, slippage, missed trades, errors etc. and the required success rate to get a reasonable profit factor may be about 7 - 8 winners out of every ten trades. Few can get that high success rate.

Size does not matter with ES, you can do 50 no problem, all that matters is whether you have a startegy with a reasonable profit factor for you target levels.

The formula I used to calculate the success rate is from the book "Profitability and Systematic Trading" by Michael Harris, one of the best books on trading and system development and you can find the derivation in the free article
"Derivation of the Profitability Rule and its Application in the Discovery of Trading Systems Based on Price Patterns" in the following link:

http://www.tradingpatterns.com/About_Us/articles/articles.html

If you are not aware of this furmula I suggest you understand how it is derived and what it means. Good luck to you.

Alex