Why is it that so many traders eventually move up to Emini day trading and is it just coincidence that those are often the people making the biggest returns on capital ?
I think not ! because emini daytrading allows us to control and speed up time – (well sort of anyway ). It is all to do with the compounding.
Generally compounding is used against us in the guise of HP interest or Credit Card charges etc and it is what keeps us poor.
House prices are probably the best example of compounding working in our favour – you pay $100,000 for a house and 20 years later it is worth $1,000,000 – or whatever. This is how many of us have become wealthy – but – the problem is you have to wait 20 years to become a millionaire! It is difficult if not impossible to speed this process up because it is the effect of compounding relatively small annual returns over time that actually creates the great wealth. So one might say it is easy to get rich slowly with property but far more difficult to get rich quickly in property.
What makes trading different and thrilling is that we can effectively speed time up. We can, in effect, make it run just as fast as we want – because in trading time does not have to equate to just days, weeks and years but also to the other variable, namely, trade frequency.
Emini Daytrading is the absolute perfect vehicle to facilitate this type of rapid and often very rapid account compounding.
With house prices we are getting a fixed % return every day or week or year and we cannot change that whereas with trading our returns are not earned by the passage of time they are earned on each trade irrespective of whether it lasts for 20 minutes or 20 days or 20 months. If we take more trades our % return per day or week rises and hence we earn more money (assuming of course we are trading a system with a positive expectation).
By way of example let us take a simple system which has a 50% win rate but when it wins it wins 150% of what it loses. Great system with a clear positive expectancy. If you started with $500 and put on 1 trade per day risking 5% on each trade you would have around $800 at the end of Month 1 (after 20 trades) and around $40,000 after 10 months (200 trades)
Fantastic results but what if instead of taking 1 trade every day we now took 5 trades each day. We would then have traded 200 times not in 10 months as above but in just 2 months. If the trades were sequential (allowing us to adjust our bet size after each trade) all the other figures in the table (posted earlier) would remain the same. This means that we have now turned $500 into $40,000 not in 10 months but in just 2 months !
This is one of the ways that people can and do “get rich quick” in trading. In a way that I do not think you can replicate as easily in any other business. First harnessing the magic of compounding and then turbo charge it by adjusting trade frequency (subject of course to portfolio heat and other money management considerations).
The effect trade frequency has on results is truly immense and its importance is extremely difficult to overstate.
In order to take full advantage of the effect trade frequency has on the speed of compounding we need to be able to take shorter term trades (Emini daytrades for instance) and then lots of them. Emini trading and more specifically Emini day trading allows us to do exactly that.
Swing trading and worse still long term trend following restrict our frequency of trade and make the road we need to travel feel a lot longer than perhaps it needs to be.
The Professional Trader automated trading course and automated mechanical trading systems are premised on using Emini day trading and to a lesser Emini swing trading and forex day trading systems to enable us to harness trade frequency and use it to maximise the power of compounding.
When we then add in the more aggressive position sizing formulas taught on the course results can be compounded at an almost unbelievable rate – even over very short periods of time such as a matter of weeks.