Thursday, 13 January 2011

Trading Every Day to Make a Living: Part 1

Let's reverse engineer consistent profitability.

Start with how much money you need a month in order to trade full time for your living. I'll pick a number that I've heard from some of my students: $5,000. If that's not you, then take multiples of it. Out of this you pay all your costs and taxes too.

OK, $5,000/month is about $250 per trading day.

When you see the fluctuations in the market it doesn't look too hard, but not quite so easy to achieve without a structured methodology.

Now $250 is 5 ES points (or 20 ES ticks) or 20 Euro FX futures ticks. Still doesn't sound like it's hard. Now consider that these 20 ticks are the difference between your winning and losing trades. It could be 40 winning and 20 losing or 60 winning and 40 losing. I'm ignoring commissions, but the more you trade the more the broker gets out of your $250 and the more ticks you need to earn to get to keep $250. All assuming you can make more ticks than you lose.

This is where it gets interesting. What if you could be fairly sure of, say, an 80% win rate? Could that make you CP? Look at the stats below for a 1 month period of a stock index future.

In the next parts of this post in the next days, I'll explore how to exploit this information. How to lock in that $250 per day, and how to reduce that learning curve.

The chart today is of the Dow Eurostoxx50 that trades on Eurex. It shows how I used Flo to make entries and how I override the exits plus make additional entries. I have added some additional PaintBars so I can visual see some order flow details. The CYAN up arrows are additional manual entries and the RED down arrows are manual exits.


  1. Hi EL,

    Thanks for your great blog.

    Am I reading the Performance Summary Correctly? It looks like it says the average loss is 4.3 times the average win. Is that correct? If so, doesn't that mean you'd need an 81.13% winning rate just to break even?

  2. I'm trading ES RTH. There are not that many setups imo.
    It's very difficult to make 20 ticks on ES with 1 ct if you ask me.
    Yesterday we had during RTH only 26 candles....
    How many setups did we have today?

  3. Anon, wait for all the parts to this post. This is a starting point.Win rate rules.

  4. Anon 21:27, you have lots of alternatives to ES. Your options as a 1 lot trader for managing trades are more limited as obviously you can't scale out. There is a lot you can do choosing markets with more opportunity. Eg, the ^E now has more opportunity. You can also make yr range bars smaller, eg 3 ticks.