Tuesday, 20 September 2011

Make 2 ES Points A Day & Charts Are Back!

I keep thinking about a guy I've written about a couple of times: the guy in California that traded T-Bonds in the 1980s. He would look to make only make one trade in his size when the market opened and then hopped into his Porsche to go to the beach.

It's beginning to look better and better to me day by day. Maybe not just one trade, perhaps just trade for an hour and a half.

A simple Flo algo I have, does exactly that. It starts trading the ES at the open of RTH and finishes an hour later. The target profit is $87.50 per contract per trade. The win rate for the last 6 months or so is about 75% and the return is almost 4 times the drawdown over that period. Profit Factor is 1.47. The big number is $4,528.50 after commissions. These are hypothetical numbers, as I have only been trading this particular algo live for about 3 weeks.

Now $4.5k per contract in 6 months doesn't look terrific. It averages out at a little over 0.75 points after commissions per day. But it looks solid. And it's only working an hour a day. And trading 4 contracts would make a nice day.

The interesting thing is that by using this as a basis, scaling out half at the $87.50 target and using discretion with a breakeven stop, I can more than double that average profit.

The point I am trying to make with this post is that the starting point for designing your trading plan, whether as a discretionary trader or as an algo trader, is to define what you want out of your trading and then design and engineer the rules to meet those objectives, of course basing it all on a methodology that sits well with your DNA.

Designing a TP with a matched set of algo rules is what we are going to do with each attendee at the November 5 workshop. Each trader, if he knows what he wants, will end the sessions with a personalised TP and algo rule set.

I was leaving it to Flo today as I was busy working on the Nov Workshop program. The chart below shows the only two trades Flo found on this chart. She missed an earlier entry as the picture missed the entry requirements in the algo by a hair. That's fully automated trading. I would have made a little more with discretionary exits too, But I didn't have to watch the market so 12.5 points or $625 per contract wasn't too shabby. The high win rate gives me confidence to trade size.

The first trade was a late entry after the trend change, as was the second.

There are so many ways to use an algo, whether by a newer trader who uses it to make sure that he sticks to a back tested TP or by a more experienced trader running several algos on different markets or anywhere in between.

I truly believe that algo trading, either for just entries or fully automatic, is the Holy Grail of trading. 


  1. Three points. Three trades. Ninety minutes.

    I start trading when the ES market opens (RTH) and stop when: (a) I make three points, (b) I make three trades or (c) the market is open for 90 minutes. I'm done by 11:00am ET.

    I got tired of making money in the morning and giving it back in the afternoon. This has been an important part of my strategy for getting to CP. I'm averaging 20-30 points per month per ES contract.

  2. Anon 17:06, Congrats, that's what trading is all about - reaching your goals. Sounds like you have a scalable methodology that can make you what you want.