Wednesday, September 23, 2009

Going Live Tomorrow... Again!

Sorry its been so long (I sound like a broken record with that phrase lately) but everything is finally taken care of and i'm ready to go. I'm not trading today due to FOMC but i've got the money in my account to trade the TF and NQ. So what i've done is this...

I took 3 timeframes that I really preferred and gave me the most trades out of the 9 I typically monitor in both the TF and the NQ. I'm doing this for two reasons. 1. Cut down on the charts I have to monitor and attempt a more simple approach to make the days (and overall results) much more clear cut. 2. There are some of my "longer term" daytrade charts that rarely give me signals. Therefore, i'm wasting a lot of screen real estate for something that isn't paying me nearly enough to justify its use.

So why trade the TF and the NQ? The idea behind this is simple, to use them as a hedge against one another's performance. I assume that every market has a set amount of probability in its winning and losing trades, however I can't control when and where the drawdowns are going to occur. So the only way to minimize my overall drawdowns on my account is to hedge out that risk by adding a new market. The idea being that while one market may be performing poorly, the other is performing well negating the effects and minimizing (or eliminating) any account drawdowns. The problem is this: The NQ is still fairly heavily correlated with the TF (or any other US market) so its more of a pseudo-hedge if anything but I am going to trade it regardless.

Ideally I would like to use the currencies as a hedge here but TradeStation's margin requirements on Forex futures are ridiculously high. But for example, last week the TF was horrendous for me. I lost a total of 300.00/per contract over the entire week and there was just nothing for me to do about it. It was the worst performing week i've ever seen in the market trading this method. That's just how the trades fell. But if I would've just been monitoring the EC on a 5 minute chart there was +562.50 of textbook profit in that market during the same trading hours as the TF during the same week. So in effect by monitoring an uncorrelated market I was able to hedge out the effects of a horrible week in one market with a great week in another. But until I can get into the Forex futures markets the NQ will have to do!

The idea behind this little experiment is to get some real live results to show the validity and profitability of the results using this approach. Backtesting can only prove so much. Its being able to perform at the hard right edge that defines a trader as successful or as a failure.

So to anyone still around reading this... i'm back along with this blog. Thanks for sticking with me and I can't wait to get the journey started once again.

Cheers!

2 comments:

M said...

Glad to see you back!

E-Mini Player said...

Good to see you're back. Good luck!