Monday, 30 January 2012

Making $ with the ES and The Best of All Worlds

This month will be the completion of a big project for me. I've been working on rationalizing my trading business into what makes the most money and the utilization of my capital, all with the least amount of screen time.

I've been tracking my P and L and use of capital and have come to the conclusion that I should do the following:
  • Day trade as a discretionary trader for a few hours a day or as much as I enjoy it. This will not only make the most money per $ invested but will keep my head in the game. If I would only trade for a few hours a day as a discretionary trader, there is a limit on my size - both for my own psychological deficiencies as well as the problems of trading size with my style in the less liquid markets such as the DAX. This will use a very small percentage of my capital as day trade margins are very small. I expect that this will contribute about 10% of my monthly earnings.
  • Autotrading a portfolio of different markets and different algos for the same markets. I will get diversification from both markets and the differences between algos trading the same market in different broker's accounts). My investment will be both in margin and drawdown and I will allocated about 25% of my capital to this and expect about 60% of my monthly earnings to be provided by FloBot activity.
  • Option trading will utilise the balance of my investment capital doing the longer term strategies I have spoken about. This will bring in about 30% of my monthly earnings.
The nett affect of this will be a lot more time to do other things I want to do. It also provides a great deal of more passive (less active) income.

I'm talking about this because I think that it is important to be aware of the many ways of profiting in our industry. Perhaps you start out as a discretionary trader, perhaps as an auto trader. But there are limitations of either capital or time and there may be other ways you can make the money you want to other than what you first start to do. Most of the guys on the FloBot Workshop were discretionary traders who either wanted to add to their incomes by diversifying into auto or were wanting to switch to auto to earn more than they could as a discretionary trader.

Traders have been complaining bitterly about the ES. While the ES has much reduced volume and volatility, there is still plenty of money to be made in it. Although I like other markets better, the depth of the ES provides a lot of benefits for trading size. But adjustments need to be made. We are in Transitional markets and I've dropped the range bars to 3 points for today's trading. The results speak for themselves. Same methodology, I just adjusted my glasses.

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