Announcement

Collapse
No announcement yet.

Millionaire in 10 weeks & Conversation with broker

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Millionaire in 10 weeks & Conversation with broker

    Hi guys,

    I started this exact same thread on 2 other trading forums so far and the views literally exploded on both of them (25,000+ views on TradeStation in about 5 years and over 10,000 views i just 5...DAYS on Big Mike's forum).

    Since AMP Futures is my new broker now, it's perfectly normal to post it again on this forum too although it's quite less populated here than on these other forums but give it time. When my indicator and trading system will be convert from EasyLanguage to C# to fit MultiCharts.NET platform, things will heat up, ESPECIALLY that thread because right now everyone pretty much laughs about it.

    So here's Part 1 - Money Management post. Part 2 will be posted below in another post.

    Hope you enjoy,

    Merlin

    = = = = = = = = = = = Part 1 - Money Management = = = = = = = = = = =

    What I'm about to post was one of the most popular thread on the TradeStation forum with over 25,000 views back in 2014. However, over there, there are A LOT of negative people bitching at anyone with bold ideas, they make fun and ridicule newbies all the time so that's why, even though I was a member of that forum back in 2005, I never much posted anything there except that Millionaire in 10 weeks thread that attracted a lot of people.

    Basically, in 2014, I had a chat with my previous broker and the conversation went like this...

    = = = = = = = = = = = = = = BEGIN CONVERSATION = = = = = = = = = = = = = = = = = = = = = = = = = =


    - Merlin: At a leverage of 100:1, I can start trading a Standard Lot (100,000 Units) for only $1,300...correct?

    - Broker: Correct.

    - Merlin: So this means that by risking only $1,300 of my trading account, and I make say 26.5 pips today, then each one of those pips will pay me $10 each... correct?

    - Broker: Correct.

    - Merlin: So this means that I would have made $265 (26.5 pips X $10 each pip) out of a $1,300 Initial Investment. Correct?

    - Broker: Correct.

    - Merlin: If you do the math, this $265 profit daily is exactly a 20% ROI on the $1,300 Initial Investment.

    - Broker: Ok

    - Merlin: So this means that if I make this daily 26.5 pips profit, at the end of the 5 trading day, I will have made a profit of $1,300 all from an initial investment of $1,300 so in other words, a 100% ROI per WEEK???

    - Broker: Hmm, interesting pov here but I think you are right.

    - Merlin: Now did you know that at a 100% ROI per week, you can turn that initial investment of $1,300 into over $1 Million in just 10 weeks if you keep reinvesting the profit?

    - Broker: Maybe that's possible, although I have never seen a client do it for real.

    - Merlin: Yeah I know, everytime I say the "M" word (Million) people either start laughing or tell me how crazy I am but when I ask them if its possible to make 25 pips each day then they all say "Huh, yeah, I know many traders who do that". So since many traders can do a 20% daily with their 25 pips daily, why not continuously reinvest their gains to go for the Million in 10 weeks?

    - Broker: Good point. That's because fear plays a big role in trading. Maybe they think that because the numbers get bigger, they will lose more.

    - Merlin: Yeah, that's my assessment too. So even though it is possible to get that daily 25 pips and make that 100% ROI weekly, the fear that traders have of losing all those big numbers will stop them from doubling down each week and go for the Million in 10 weeks?

    - Broker: Looks like it.

    - Merlin: Alright, thank you, it was nice to get the pov of a broker here. So maybe I'm not that crazy after all. hehe It may be VERY BOLD but still doable so have a nice day sir.

    - Broker: You too.

    = = = = = = = = = = = = = = END OF CONVERSATION = = = = = = = = = = = = = = = = = =

    Again that was back in 2014 but today in 2019, this conversation could be about the new Micro Futures.

    Each Micro Contract of the Russell 2000 Futures (Symbol: M2K) cost me $25 in intraday margin at my new broker. As you may know, the tick value of the M2K is 50 cents so if you make 50 ticks at $0.50 each then you would make a $25 profit out of an initial investment of $25 so just like in the conversation above with Forex, you would make a 100% R.O.I.

    I know that it's possible because I just did that yesterday on a sim with my new broker (more on this later) just to test the grounds.

    So if you don't believe me, just start a chat session with AMP Futures and ask them if their Intraday margin is really $25 for a M2K contract and if this contract pays 50 cents per tick so 50 ticks later (5 pts) whether or not you will have made a profit of $25 or not and look what they will reply.

    Now I have found the money management diagram that I posted on the TradeStation forum that started the frenzy and here it is...

    Basically, it goes like this...

    Back then, it was about Forex Standard Lot costing $1,300 per lot but for this example, I shrunk it to $1,000 a piece.

    The idea was to open a Forex account with $10,000 and split it into 10 blocks of $1,000 each. Since we always start with 1 (green $1,000 block), that will leave 9 orange blocks as backup in case we lose the green one.

    As mentioned above in the broker conversation, by making those 26.5 pips per trading day ($265) X 5 days per week, you would end up with a profit of $1,300 enough to be able to double your Forex lot. On the diagram below, the green $1,000 would have now doubled itself and we would now be in the $2,000 column.

    You would double that way 3 times (from 1K to 2K, 2K to 4K and then 4K to 8K) and then what you would do is split the 8K into 2 blocks of 4K leaving one as a backup (orange 4K) and the other green 4K to restart the 3 doublings again.

    What this does is creates a safety net under each level so that if you fail during the climb, you would have all kinds of orange backups to hold you back at these high levels instead of losing it all and go back to the $1,000 level.



    Of course, at that time, all the negative people who call themselves "Realists" were laughing about this and calling me a moron and telling me about the HUUUUUUUUUUGE DRAWDOOOOOOOONWWWWS, etc, etc... until a guy named Tim took his eMini S&P trading system and programmed my Million $ doubling Money Management Technique into it and backtested it to see if it was possible and guess what, IT IS POSSIBLE. :faint:

    He calculated all the slippage and commissions costs and posted these screenshots...

    = = = = = = = = = = Begin Tim Message = = = = = = = = = =

    Hi Brian, here is the full report less trade list
    You are correct about liquidity. The highest amount of shares purchased is 656 shares.
    I'm going to add code to limit the amount of shares per Merlins chart. This will extend the time it takes to hit the 1 M target.






    = = = = = = = = = = End Tim Message = = = = = = = = = =


    Now by posting this, Tim kinda confirmed that my "crazy 1K to 1M Climb" idea was doable after all but there were still 2 main problems ahead...

    The first one is that even if we have the stomach to double all the way to the million $ level, will we be able to get in and get out FAST when you trade 50, 100, 200 or 500+ contracts???

    Thankfully, Tim answered that one too by locking down the contracts to only 18 ES contracts. Despite that, he was able to backtest it again on his system and these are the performance he reported...

    = = = = = = = = = = Begin Tim Message = = = = = = = = = =

    Ok, I choked down the number of shares to a maximum of 18 shares to hit the $1000 to 1 million target in 10 weeks.

    = = = = = = = = = = End Tim Message = = = = = = = = = =


    So that kinda solve the liquidity problem that we may have by starting to trade big numbers of Futures contracts. If you think you don't have the stomach to trade 10 M2K (Micro Russell) contracts and then 100+ RTY (Mini Russell) contracts then you can always lock your contracts to 18 and still be able to reach the Million $ mark within 10 weeks.

    However, there is a 2nd problem and this is the one that will stall everybody include me and this is it...

    Tim was able to go to the million $ because he had a "Killer Trading System" that would make him win more $ than he could lose where he was able to use my Money Management and double his ES contracts all the way to the Million $ but...

    NOT EVERYONE HAS A SUPER PROFITABLE TRADING SYSTEM LIKE TIM HAD....

    Yes, with the M2K futures, if you make 5 pts, you will make a profit of $25 out of an original investment of $25 (M2K Intraday Margin) and make a 100% ROI but what if you LOSE those 5 pts??? That's right, you get a 100% DRAWDOWN. :faint:

    Sure you got those orange backups at each level you reach but still, you need a good trading system to begin with or you are going NOWHERE.

    So since 2014, my quest was to find the best trading system and that was easier said than done. Maybe for you guys here, creating from scratch a trading system that will be making your 5 Pts on a daily basis is a piece of cake but that's not my case here and without that killer trading system to make those 5pts, this means no trading, no doubling of contracts and this means no climb to the million.

    So this is Part 1 (Money Management), in Part 2 (Trading System), I will tell you guys where I am on the development of the trading system that could help us all climb this Million $ climb.

    Part 2 is below...

    Cheers,

    Merlin

  • #2
    Above is Part 1 (Money Management). I strongly suggest you go back to it and read it FIRST or else you may have trouble understanding this Part 2.

    So... as I was saying in Part 1, the climb to the Million $ mark is AAAAALLLLLLLLLLLLL about having a killer Trading System. In fact, I would even say that my Money Management Technique on Part 1 is just 1% of this and the Trading System is 99% of the job.

    Part 2 is about my past years of research to find that "Safe" Trading System that will help me climb this Million $ ladder.

    Before that, here's a little recap on how we can do this climb to the Million $ mark using the new Micro Futures at my new broker AMP Futures where the intraday margin for the Micro eMini Russell 2000 Contract (Symbol: M2K) is only at $25.

    At $25, we already know our initial investment cost and we also know that the Micro Russel (M2K) pays 50 cents per tick it does.

    Now it doesn't take a math wiz to do the math here and know that it only takes 50 ticks X $0.50 per tick to make a profit of $25 and since the initial investment is also $25, this means that you have made a nice 100% ROI and can now buy a 2nd M2K contract and trade with 2 M2K contracts instead of just one.

    Also mentioned in Part 1, if it's true that we can make 5 pts and get a 100% ROI, it's also true that if we lose 5 pts, we get a 100% DrawDown and that's what I tried to avoid here. yes I had my orange backups at every level but the goal is not to always lose those 5 pts all the time. yeah I know, easier said than done.

    To do this, we need to be at the cutting edge of research and using trading tools that weren't even here 5 years ago. It's what I call the difference between "Dinosaur Trading" and "HD Trading".

    Dinosaur Trading is trading with old technologies, old trading instruments (Stocks, Forex and even eMinis) and still use charts with old bars like minute bars for example.

    HD Trading is using the newest charts super precise and price based bars like Range and Renko bars and using brand new trading instruments like the 2019 Micro Futures because the M2K cost only $25 per contract removing 90+% of the fear of losing money (if you are still afraid of losing a HUUUUUUUGE $25 M2K contract, maybe trading is not for you ;-) ).

    Dinosaur Trading Vs HD Trading

    What is Dinosaur Trading you ask? Well, no need to Google it because I just invented it. ;-)

    Basically it's doing things the old fashion way with outdated bars like Minute Bars. What's wrong with Minute bars you may ask? After all, the big institutions and Elite Traders are still using them.

    Well... Minute Bars have 2 the main problems:

    1- A minute chart makes too many bars when the price is standing still.

    If the price hovers within the same pt on your M2K or RTY chart, chances are if you use a 1 min chart, you will get 60 bars that are all lines up like cute little ducks side by side while in fact all these bars are totally useless because, the market is not moving at all so no need for tons of new bars.

    2- When the price explodes, a minute chart doesn't make enough bars.

    For example, let's say that the price did 5 pts within 1 minute. This means that you will see 1 HUGE 5 pt white or green candlestick bar. Once again totally useless for traders because when the bar closes, it's too late, you missed the boat, the big move has been done. Even worse, if that 5pt bar turned against you, you not only lost that trade, you lost your entire initial investment. You can't risk losing 5 pts in one trade, you will get wiped out in no time before you can even start this Million $ climb.

    Here's a 5 min chart of IBM. Notice that big 5 Minute red bar. Wayyyyyyyy too long for my taste here.



    Now let's take a look at Kase Bars which are bars that are based on price movement, NOT ON TIME.

    If the price goes above or below that bar, only then a new bar will be created. This means that this big red bar was cut into smaller bars.

    This way, when it did that big red bar, instead of making just one big bar, it made many little red bars like on a staircase. This chart below is a 0.1 pt Kase Bar chart.



    NOW THIS is what I call "HD Trading".

    You can shrink these price based bars (Kase, Range, Momentum, Kagi, Renko) down to 1 tick if you want to.

    Here's one based on 3 ticks bars (0.03 Pt Kase bar chart).



    Do you see the type of Super High Definition Charts we can have these days? THIS is how we can cut our losses. Most of my losing trades are only 5 ticks or 0.5 pt.

    Ok, now that you know how I will reduce my losing trades, let's talk about how I will make those 5 pts that will allow me/us to make the climb to the Million $ mark.
    Last edited by Merlin-MTL; 08-01-2019, 07:00 PM.

    Comment


    • #3
      Moving Average Vs Squared Moving Average

      We all know that to find the present trend, Moving Averages or MAs are one of the best tool there is and I agree but they have flaws. They lag, at least too much for my taste and it's the same for Simple, Exponential, Hull or Weighted MAs.

      I would like to think that I improved on MAs because I am Financial God but sadly for my ego, I didn't do it because I'm smart, I stumbled on it by pure luck, playing with my indicators.

      At TradeStation, we can create very cool indicators from scratch even for a basic programmer like me but I didn't know how to program what I had in mind (a Price Based Donchian Channel) so I asked a pro to do it.

      He gave me the basic code and I had fun playing with code to modify it and what I did is add a center line on my new Donchian Channel. I then removed the upper and lower bands and that created what I named my Merlin Squared MA.

      As you can see here, I have programmed this Squared MA to be light blue on the way up and magenta on the way down. In comparison, I have a 50 Simple MA going down in Red and up in Green.

      You can see that my Squared MA stay magenta all the way to the bottom while the 50 MA changes from Red to Green all the time.



      Same thing here...

      That 50 Simple MA is all over the place.




      Here's another screenshot where I have a 100 and 200 MA compared to my white/blue Squared MA.

      You can see on the top left that my Squared MA turns from white to blue and 100 and 200 also but they are a bbit late to change their color.

      On the way down the 100 and 200 are either too late or too early to change color. Anyway, long story short, I prefer by far my Squared MA to any other types of MAs available on most trading platforms.



      So what I did is added a 2nd Squared MA and made one "Bar High" and the 2nd one "bar Low" and that created what I call the Merlin_Cloud as shown below.


      Comment


      • #4
        Next I added a 2nd cloud, 1 with smaller numbers to have a Short TimeFrame and another for a Medium TF and I got my Merlin_2Clouds indicator to tell me not only the present trend but also showing me where the price is really extended when those "dips" occur within or below my 2 clouds.

        Here's yesterday's chart.

        You can see in the green circles the best entry points are when the price drops to the level of the clouds.



        You can see in Thursday's chart something even better yet...

        The price went up not only to the level of the Medium TF Cloud (dark blue) but sometimes even above it and that usually gives us the best entry points possible.



        Anyway, long story short, I used my 2 clouds indicator to tell me the trend (white is up and blue is down) so the clouds were white so ready to trade on the Long side and got in a bit late because I arrived about 30 minutes later than the best entry possible around 1,573.



        The point of all this is that my M2K contract cost me $25 and with those 5 pts, I was able to make a profit of $25 making me a 100% ROI on my initial investment giving me 2 contracts to trade on the next trading day.

        In other words IT IS POSSIBLE to make 5 pts and double your M2K contract. :becky:



        Any questions?

        Merlin

        Comment

        Disclaimer: There is a risk of loss in trading futures, forex and options. Futures, forex and options trading are not appropriate for all investors. Only risk capital should be used when trading futures. All information is for educational use only and is not investment advice. Past performance is not indicative of future results.

        This website is hosted and operated by AMP Global Clearing, LLC ("AMP"), which provides brokerage services to traders of futures and foreign exchange products. This website is intended for customer support, educational and informational purposes only and should NOT be viewed as a solicitation or recommendation of any product, service or trading strategy. No offer or solicitation to buy or sell derivative or futures products of any kind, or any type of trading or investment advice, recommendation or strategy, is made, given, or in any manner endorsed by AMP and the information made available on this Web site is NOT an offer or solicitation of any kind. The content and opinions expressed on this website are those of the authors and do not necessarily reflect the official policy or position of AMP.

        All Users and Contributors along with their websites, products and services, are independent persons or companies that are in no manner affiliated with AMP. AMP is not responsible for, do not approve, recommend or endorse any User and/or Contributor Content referenced on this website and it’s your sole responsibility to evaluate All Content. Please be aware that any performance information provided by a user and/or contributor should be considered hypothetical.

        HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

        ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

        AMP has NOT endorsed or recommended the use any product, services offered by any 3rd party User or Contributor on this forum. No person employed by, or associated with, AMP is authorized to provide any information about any 3rd party User or Contributor content. All specific brokerage related questions should be directed towards AMP.

        Copyright © 2017. All rights reserved.

        Working...
        X