Trading Every Day to Make a Living: Part 2

Following on from Part 1:

OK, you have an 80% win rate and the drop dead stops look alright. The system is profitable, but perhaps only marginally, as you have used a reasonable first target to ensure a high win rate. Many times traders sacrifice the win rate by changing the targets, in order to become profitable on paper. They often do this to the point where the win rate drops to as low as, say, 35%. In the experience I have had with many traders, when this target changing happens, the trader can't follow the system, as he doesn't know when it's broken. Usually the system is curve fitted and, from the trader's experience, if he followed it he would lose all his money.

So, that doesn't work but what does? What I do is to keep the win rate, use it as a first scale out point and then manually manage the trade in accordance with rules that I can't program, as they are so context sensitive. I codify my rules in my TP so I have consistency.

The outcome is a high win rate and good profitability with low drawdown.

Today's early trades in the Euro future are a good example. The Flo managed trades were great, but the one I exited manually was obviously in trouble, so I used my rules to manually exit and saved the $300 drawdown and spent about $165 instead. If I do this every day, then the difference at the end of the month is very considerable. It's the EXIT to the trade that makes the difference.

More in Part 3.

Trading Every Day to Make a Living: Part 1

Let's reverse engineer consistent profitability.

Start with how much money you need a month in order to trade full time for your living. I'll pick a number that I've heard from some of my students: $5,000. If that's not you, then take multiples of it. Out of this you pay all your costs and taxes too.

OK, $5,000/month is about $250 per trading day.

When you see the fluctuations in the market it doesn't look too hard, but not quite so easy to achieve without a structured methodology.

Now $250 is 5 ES points (or 20 ES ticks) or 20 Euro FX futures ticks. Still doesn't sound like it's hard. Now consider that these 20 ticks are the difference between your winning and losing trades. It could be 40 winning and 20 losing or 60 winning and 40 losing. I'm ignoring commissions, but the more you trade the more the broker gets out of your $250 and the more ticks you need to earn to get to keep $250. All assuming you can make more ticks than you lose.

This is where it gets interesting. What if you could be fairly sure of, say, an 80% win rate? Could that make you CP? Look at the stats below for a 1 month period of a stock index future.

In the next parts of this post in the next days, I'll explore how to exploit this information. How to lock in that $250 per day, and how to reduce that learning curve.

The chart today is of the Dow Eurostoxx50 that trades on Eurex. It shows how I used Flo to make entries and how I override the exits plus make additional entries. I have added some additional PaintBars so I can visual see some order flow details. The CYAN up arrows are additional manual entries and the RED down arrows are manual exits.

Now available: Google Places with Hotpot for iPhone

[Cross-posted from the Hotpot Community blog]

We recently released Google Places with Hotpot in Google Maps for Android, and starting now, you can have that same great experience as an iPhone app. We realize the importance of finding places you’ll love while you’re out and about, no matter what mobile device you use. And Places with Hotpot not only helps you find places near where you are, it gives you the best places to go for you by personalizing your search results.

In case you aren’t familiar with Google Places, it lets you quickly search for places nearby and personalizes the results based on places you’ve rated. We get you started with a few popular search categories, but you can also tailor the list by adding your own favorite searches. This makes it fast and easy to find the best places for you with little fuss.

Use a default search category, save your own, or rate the nearest place quickly.

It can be pretty rewarding to discover a new place you love, but we also realize that there are some experiences you just can’t wait to share. So Places makes it super simple to rate a place with your iPhone while you’re there. Just fire up the app and hit “Rate now.” It will use your location to guess your current place and let you post a Hotpot review right from your phone. But it’s not just about getting to say what you think—the more you rate places, the more you’re sharing about your tastes and the more we can give you personally tailored recommendations.

Give your star rating and add optional details or a review so Hotpot knows your taste.

If you want to make things even tastier, just visit google.com/hotpot from your desktop computer. Here you can add friends to the mix and quickly rate all the places you already know. Once you’ve added friends, you’ll find your results seasoned not just with reviews from around the web and recommendations based on your own personal taste, but also with your friends’ opinions too.

Once you start rating and add friends, Places can give you personalized recommendations.

Get the Places app on your iPhone now by searching for Google Places in the App Store or going here.

This first version of Places is available for all iOS devices in English only. However, expect more features and improvements to roll out soon, including localization in many new languages. We’re hard at work to make Places with Hotpot more and more delicious.

Posted by Greg Blevins, Software Engineer, Google Hotpot team

Know when to Hold'em and Know when to Fold'em

Kenny said it all. I guess life and trading is all about timing.

I  posted a link to a Mark Douglas video a few days ago that stressed the importance of ACCEPTING THE RISK of your Trading Plan. If you're not taking or holding your trades then you are deep down NOT accepting the risk. It's important to know when to hold'em and know when to fold'em and it's difficult to know that without having done your homework.

The requirement for me is BELIEF. I can put my trades on and manage them because I BELIEVE, and I believe because I have back tested. Because I have back tested I can accept the risk, because I KNOW that I will be profitable over time. This is a 3 cornered chair; Testing, Belief and Acceptance. This makes for a stable trader's profile.

I'm working on some posts that show more of the maths that are involved in CP. There are a number of things to decide in order to create the necessary numbers. I'm hoping to have the first post of a series ready by tomorrow.

Today I tweeted:

$ES_F, My cup runeth over, nother Gap Trade setting up not much Res above so need to watch Order Flow & momo

I put my money where my tweet was and went short about 15 minutes before the RTH open @1278.25. This is one of the trades we spend time on in the course. The DVDs have me trading a couple of them live and shows how to handle this trade, even when it doesn't quite go as planned. See the vid below.

Introducing Google Engage for Agencies in US and UK

[Cross-posted from the Agency Ad Solutions Blog]

Are you a US or UK based Webmaster? WebDesigner? SEO? Marketing Consultant? Freelancer? or offering web related services to Small Medium Businesses? then keep on reading...

At Google, we’re committed to the success of the digital economy and we believe that helping small business get online and thrive is fundamental to that success.

We recognize that many SMBs rely on freelancers and small agencies to create and manage their online presence as well as help them with their online marketing. To make the jobs of these agencies easier, we’ve launched a new training and incentives program called Google Engage for Agencies.



Google Engage participants will receive free access to educational resources dedicated for them and more incentives to grow their own and their clients’ businesses.

We hope Engage will help businesses that offer web services in attracting new clients and in adding value to existing clients. Check out Google Engage today and learn about the benefits the program can offer your business and the SMBs you support.

If you’re a webmaster, web-designer, digital agency, freelancer, SEO, IT consultant, or provide any other web services to US or UK based small businesses, you can apply to join the program starting today.

Please see links below for information on participation for US and UK-based agencies:
Google Engage for US Businesses
Google Engage for UK Businesses

Posted by: Alon Chen & Esra Guler, Product Marketing

A Plan for tanks.

The rocket equation has two parts structural efficiency and motor performance. Since the beginning of our project we have spent considerable effort thinking about structural efficency.

Clearly modern composite structures hold real promise for improving structural efficiency. I've dabbled in composite structures but I am very much a beginner. The tanks produced by professionals like Scorpius Launch Systems/Microcosm are both amazingly functional and beautiful. It would take me a decade to acquire that level of expertise. The recent composite coupons I tested for peroxide compatibility were fabricated by Microcosm/Scorpius. I'm currently riding home from a meeting at their facility where we finished the details of a joint development program to build peroxide compatible liner less tanks.

I think this is a win win for both parties Scorpius will get a new product line and we will gain access to world class tanks.

One Methodology, One Chart, Any Timeframe

Robustness of methodology is very critical to CP. If you can't rely on your methodology, then you will find it difficult to put the trade on. I use the same methodology on any market and on any time frame. That doesn't mean that you can just load any periodicity, but it means that within the periodicity range you want, you should be able to find a time frame that is in sync with the market's rhythm or fingerprint.

Robustness means that I don't want the methodology to "not work". "Not work" is a fairly subjective measurement. I'm OK with a losing day and a losing week and perhaps a borderline losing month if I can see why. These are things that need to be addressed in back testing. Getting the right mix of trade frequency, risk and reward is very important, taking into account your own inputs such as available capital, risk tolerance, hours available to trade, time required by you to make decisions and more.

I use the same methodology for longer term trading and short term trading, as I have said before, but I choose the best instrument to trade it: future, ETF or option, depending upon the context. I was always determined to be responsible for my own investments after seeing the mess that agents made of other people's. I remember the quote from Woody Allen in "Midsummer Sex Comedy" where he said he was an investment advisor: "

In actual life, I help people with their
investments until there's nothing left.

Sadly, the quote is often true. The problem with investments managed by others is that you really don't have a handle on the risk aspect a la the flash crash. I like risk as long as the reward is commensurate. Where people get unstuck is when they get, say, a 12% annual return and suddenly lose 50% or more of their capital. Hard to make that up. On the other hand, everyone can't be an expert at everything so most people find a half way plan. I get trading ideas from all sorts of people and then choose what I think suits me.

The Chart below of the daily Euro chart is a good example. Even the daily charts can be traded as HT or auto.

Today's trading was quiet in the London morning. One great trade and then a change of idea. I tweeted the Gap trade yet again. The Gap trade is one of my favourite trades, as you probably have gathered by now. For me, it's a really easy trade to put on and manage. It's also very easy to back test, so I can get it right. Look at the vid for today's action.