The next time I plan a vacation/work trip I’m going to have to factor in the costs of NOT being able to trade SST with the Russell eMini. Our TF strategy has been relentless with its trek to hit new profit levels nearly every day. Last week it posted another +16 points. That’s after posting a whopping +27 points the week before. It paused a bit the week before that but still eeked out +2 points. The weeks leading up to that, going backwards, were +7.3, +1, + 26.7, etc.. It ended August with + 56.7, Sept with + 45.9 points and just ended October with + 59.3!
It is off to a great start again this week, too. I had the pleasure of calling the trades from beautiful (actually gray, cold and rainy) Paris and we hit poq in two quick and straight forward trades to kick the week off with another +3.7 points.
That had our equity curve climbing to an all new profit level again. We are at +384.8 points since April and rapidly approaching the big 400 point level for the first time since I have been calling live Russell eMini trades beginning April 2008.
Of course my cummulative point total is way over 400 but for a single trade system in such a short amount of time, this is definitely a high water mark. It took us a little over 7 months to get to this level with the basic SST approach. Accounting for commission and slippage (I use stop limit orders so I applied $10.50 per trade as an estimate), an account starting with $20,000 would now be worth a net, $41,995; over 100% in 7 months or so.
After running a basic money mgt study, the exact same trades produced $153,445! That is if you were to have risked 2% of your capital on each position. Granted, that is a larger risk than we suggest since we go into each trade with two positions. That would be a 4% risk profile per trade and double that with the add-ons which ARE included. It is also capping each position at 10 contracts. It hit that cap about 2/3rd into the run.
Some might argue that with a system that has been winning 67.23% of all it’s trades dating back to April 5th, 785 trades to be exact, that such a risk profile is actually reasonable. In fact, if we knew back then what the outcome would be, we would have risked much more. The fact is though that the Russell does go through tough periods sometimes. Many of you have heard the story of when we had 11 losses in a row with our old UMT strategy. That was a 62% winner over hundreds of trades but on trade 650, it began a losing streak from hell. Anyone starting then, with too much risk, was NOT in a very good mood afterwards. In fact, they ran for their life and quit before they had enough time to kick the dog.
The story continued though. Trade number 12 (662 actually) was the trade that broke the losing streak and was the beginning of a 16 trade winning streak and a new equity high at the time, somewhere around 150 points I think. Anyway, the moral of the story is that we are on the right edge of the chart and really don’t know what will happen on any given session or series of sessions. The fact that wins and losses will come at a random distribution is about the only thing we can be sure of. BUT, we continue to put the odds in our favor and those odds are telling us that for every 100 trades, we are winning 67.28 of them.
So it becomes important to take advantage of those odds and utilize sound money management. That’s where the real money is made. So if 2% per position, which is 4% per trade (8% with a full 2 position add-on trade) is too aggressive, than go with 1% per position. The numbers are still impressive although it is a tortoise vs. the hare comparison. $53,347 net in 7 months. It only has allowed for a 3 contract per position trade size up to this point.
It really goes to show the difference of 1%. Just for grins, if we were to have risked 3% per position on every trade posted to date, one’s account would be worth $199,173. Remember, we capped our position size at 10 contracts or the total would have been much higher. One would have had to risk 12% on a full trade with add-ons though and we must always remember that the 11 trade losing streak is lurking out there and will come up from behind and kick us in the back of the knees at some point. The tortoise beat the hare in the end and we have to always keep that in mind. The Russell eMini trades like a speedy hare but it is wise to have a little bit of the tortoise mentality when it comes to risking your hard earned capital.