Sunday, March 15, 2015

Consistent little bites will take you high, rules profit

Many beginning traders ask me:

- "How much can I make a month trading ES (S&P500 e-minis) with US$ 10,000?"

I like to answer that question with a couple of other questions:

Do you have a tested system that has a good win ratio?

Do you have a sound risk management strategy?

Does the system allow you to pull the trigger every time BEFORE the entry price gets tested?

How often does the system signal entries?

If the answer is yes to all or most of the questions above, then you must be grabbing money from the markets frequently, as long as you accept the randomness of the outcome and only leave at your target price (take profits) or if stopped out (small loss), profits will take care of themselves in the execution of 10, 20, 30 and more trades.,, not a single trade or two.

We have been trading over 5 years now using our Diamond Setups system, it gives us a consistent win ratio from 70% to 90%+.

The system generates an average of 25 trades a week on ES, below I show a typical week, let's use a possible outcome for 20 trades on the example below:

The STOP we use is always 2 points (8 ticks), winners make an average of 2.50 points, sometimes it makes much more than that, mainly when we have trend days, but we will use only 2.50 here just to give us an idea on the possible $ returns.

If we get the minimum return of 70% win ratio, out of 20 trades we'd get: 14 winners and 6 losers, what would that mean in US$?

14 winners ==> 14 x 2.50 = 35 points

6 losers ==> 6 x 2.00 = -12.00

Total in profits ==> 23 points = US$ 50.00/point = Total = US$ 1,150.00 per contract.

With US$ 10,000 you could trade 2 contracts, at least until you reach US$ 12,000, the result above would bring 20%+ in one week.

I think anyone who knows how to use a trading platform would be able to achieve that as the system we use is totally visual, you see it, you trade it, ahead of price getting tested.

Patterns repeat themselves over and over again, so when we see a pattern we like we act on it without reservation or hesitation, day in, day out, making our accounts consistently grow.

See below what you could expect when trading using the Diamond Setups:

- We watch the market waiting for a pattern to show up

- When a pattern we like shows up we calmly insert our buy/short orders including our predefined STOP and target.

- We sit back and watch the price either test our target and give us a profit, or hit our STOP LOSS (in 10 to 30% of the trades)

- No matter whether stopped out or with a profit, we just wait for the next setup.

Some traders like to stop trading after they reach 2 winners in a day and just start fresh the next day.

2 winners a day would give you 5 points a day, 25 points a week!

Just as an entertaining exercise, let's consider we took profits at only +2 every time and we ended up making just 15 points a week, let's see how big we could grow our account in just 3 months (12 weeks) increasing the size we trade every week:

Week1: US$ 10,000 - 2 lots - +15 pts = US$ 11,500

Week2: US$ 11,500 - 3 lots - +15 pts = US$ 13,750

Week3: US$ 13,750 - 5 lots - +15 pts = US$ 17,500

Week4: US$ 17,500 - 8 lots - +15 pts = US$ 23,500

Week5: US$ 23,500 - 10 lots - +15 pts = US$ 31,000

Week6: US$ 31,000 - 15 lots - +15 pts = US$ 42,250

Week7: US$ 42,250 - 20 lots - +15 pts = US$ 57,250

Week8: US$ 57,250 - 25 lots - +15 pts = US$ 76,000

Week9: US$ 76,000 - 30 lots - +15 pts = US$ 98,500

Week10: US$ 98,500 - 40 lots - +15 pts = US$ 128,500

Week11: US$ 128,500 - 50 lots - +15 pts = US$ 166,000

Week12: US$ 166,000 - 60 lots - +15 pts = US$ 211,000

That looks impossible, doesn't it?

But that's what you'd get if you could make just 3 points a day on ES, starting with a measly US$ 10,000, 2 lots on ES, even making just 2 points a day it's already really good, think about that.

Only the strong minds who commit to do what has to be done will be able to make it happen.

"Impossible only means that you haven't found the solution yet" - Anonymous

No comments:

Post a Comment