Saturday, October 07, 2006

Being profitable

Are you profitable?

Let me quote you a lesson

A martial arts student went to his teacher and said earnestly, "I am devoted to studying your system. How long will it take me to master it." The teacher's reply was casual,,,,,,,,,, "Ten years."


Impatiently, the student answered, "But I want to master it faster than that. I will work very hard. I will practice everyday, ten or more hours a day if I have to. How long will it take then?"


The teacher thought for a moment, "20 years."


Make the following commitment


I will learn for as long as it takes
I will stand up everytime I find myself at the bottom
And somewhere along the road I will decide to win
It is possible to trade successfully, but you need
  • an edge
  • a commitment
  • discipline
  • a will to win
  • the ability to look at your failures and learn from them

Does it help to see results? I know, I was looking for proof for quite a long time. So it might be the same for you reading this blog. I became profitable in June this year after 5 years of struggling and trying to keep myself somehow afloat so I could continue on my way. Looking back now, I know, I had a string of luck in June and July and was able to resist the temptation to increase the leverage used.

10k$ per contract traded. I will goto 2 contracts with an account balance of >20k$.


May I lose it again? Maybe. Everything is possible in trading and I can’t rule out a string of 15 losing days in a row or one freak trade, which wipes the account. It’s the risk we all take, the risk we have to accept in this profession. Limiting leverage is one, is the only way to deal with it. And to tell the truth I feel a lot more comfortable now, than in June, when I had to trade with the 5k$ / contract margin.

I’m sure there are traders out there saying “what is this jerk showing us here, I’m making 2k$ / day” or “I have 50k$ in my account and that’s the bare minimum I would consider for a trading account”

Never forget:

If you can’t trade 1 contract profitable, do you really think you can trade 5 contracts profitable?


David_UK said...

hi croc,

There are many charlatans out there (especially in the trading world) but even without your tabulated results ... it has always been clear (to me at least), that you were always going to be making it in this wonderful world of trading... and it is great to see that happening.

I am sure I am not alone amongst the readers of your Blog who not only enjoy the many thought provoking comments you make, but there is always so much that I learn from your postings... so thank you for sharing it all with us.

Keep it up and all the best,


David_UK said...

btw croc, do you incorporate a measure of volatility somehow into your rule that an account worth $10,000 allows for trading one contract and an account worth $20,000 allows for trading 2 contracts etc...?

I was thinking that the ES say, is a far less volatile instrument than say the Dax or the ER2 futures ... yet your rule as it stands (without taking volatility into consideration) would treat all three instruments the same ... or have I missed something?


Globetrader said...


no I don't take volatility into consideration. I don't trade the ES and I don't trade the Bonds.

Actually I'm looking to trade instruments, which give me a fair chance of getting 8 to 20 ticks in a reasonable amount of time. That means within a maximum of 60 minutes, as I trade a 9 min chart.

You might consider using a lower margin level in case you trade less volatile instruments. As you can see, compared to the margin required by my broker, the internal margin I'm using for myself is very high. But it makes sure, that I don't overleverage myself and it makes sure I learn trading, instead of just getting lucky with a few profitable trades on high leverage.

In addition there is actually no room for a volatility adaptation of the formula, as it is now part of my money management rules and not part of my trade management rules.

It's up to me to trade whatever I want and whenever I see a signal. I give me this freedom, as long as I don't violate the 1 contract rule. If the 5 USD/tick the YM pays are not worth the trade, trade something else, very simple. If the ES does not show the volatility to pay 8 ticks (2 points) on the trade, leave it, trade something different. That's just my way of trading.

And I can't argue a lot with it, as this cautious and disciplined way shows me profits, while the "high leverage" way led not once but two or three times already to disaster.

bbc said...

I read on your blog that you used Woodie's CCI and learned trading futures, I listened to their chat room and it was helpful using their software....would this be a good route for me? I am new to trading although I have managed our portfolio to good advantage. However I distrust any system software reliance due to chaning market conditions. Thank you.