Emini daytrading thoughts

Only daytrade with part of your available capital. Day trading is highly speculative and you should not, and do not need to, allocate all of your available liquid capital to it.

In my own account I allocate less than 5% of my liquid capital  to daytrading activities and yet still achieve the results you regularly see on my real money trading statements often making thousands of dollars in a day..

In day trading  you really can make very substantial sums of money, very quickly indeed even when starting with relatively small amounts of capital. One reason for this is the greater frequency of trade which allows us  to compound up our capital so much faster than with, for instance, swing trading or  LTTF.

Also because individual trade outcomes are more homogenous than with swing or LTTF methods this allows us to apply much more  aggressive position sizing techniques which can  rapidly increase account size  – sometimes by multiples in just a few weeks.

You will likely achieve more success faster with automated daytrading systems than using discretionary day trading techniques. Automated trading systems are formula based methods that can be proved to have worked in the past. Because they are quantitative evidence based systems they can be easily back tested and performance quantified and verified.  Such systems can also be rapidly modified to incorporate any new trading ideas or take account of changes taking place in the market. The impact of any changes to the system rules can then be instantly back tested, evaluated and precisely quantified.

Formula based systems such as these allow the trader to play out an almost infinite number of what/if scenarios in just a few hours and hence customise system performance (total profits, maximum drawdown, average trade etc) to more closely match the trader’s individual requirements and risk profile.

To succeed in daytrading you really do need proper education and training from proven successful traders. Short term trading is by far the most difficult type of trading to master. It looks easier than it is and without correct direction and education the chances of being able to earn a good and consistent living from it are low.

Longer term trading is easier to succeed at but does require more capital. This is because stop losses need to be wider, you have lower trade frequency, win/loss ratios are generally lower and individual trade outcomes are less homogenous. Also full margin needs to be deposited rather than, for instance, 25% daytraders margin.

Daily money goals do not work. The idea that you take 20 pips or $500 per day out of the market and then pack up and go and play Golf is flawed on so many levels. Everyone has winning days and losing days. Sometimes the market is benign and generous whilst on other occasions it is close to impossible to make any money. So on those days where the market is in sync with your systems you should be really capitalising on and pushing home your advantage to make even more money not pack up and go home early.

Ideally you should have duplicated Brokers, internet connections and hardware and software. In my experience broadband glitches are the most common problem then hardware/software problems at our end and finally server problems at the Brokers end. Try and make sure you have covered all your bases when such an emergency occurs.


Posted in:
Articles by: