Hey Monkeys,
I’m in a bit of an interesting situation here so I’d like the more experienced monkeys to chime in.
I’m currently a junior broker who has the ability to engage in discretionary trading advisory for my clients. I spend a great deal of time engaging in sales which is something I’m not too keen on, but I took this position because I thought it would be a good transition into my true dream of proprietary trading. So here’s the situation: due to conflict of interest issues, compliance won’t let me trade my personal account, but I’m trying to build a concrete, verifiable track record of trading success to leverage into a prop position.
The reason this concrete proof is key is due to the fact that I’m entirely self-taught and other than a sophomore year S&T internship, I come from a quintessentially non-pedigreed background (look at my other post to see what I mean). What I’m wondering is, if I show them trades I actually advised clients on and placed on paper, would a prop shop take me seriously? I don’t have a lot of money as of now, but I’m willing to invest in getting my CMT if that’ll further my leverage. My trading statistics are as follows:
Asset Class: Commodity Futures
Chart Timeframe: 20 Day 1 Hour
Beginning Balance on March 17th, 2020: $28,375
Balance as of April 15th, 2020: $89,735
Number of Trades Placed: 17
Total Ticks Caught Overall: 5,649 Ticks
Average Ticks Caught Per Contract: 153 Ticks
Long vs Short: 5 Shorts, 12 Longs
Average Initial Margin: $9,638
Average Hold Time: 1.00 Days
Average Gain: $6,245
Average Loss: $3,534
Total Gain: $74,942
Total Loss: $13,582
Winning Percentage: 70.58%
12/30/19-1/30/20 (Hand Backtested)
P/L: $23,899
Number of Trades Placed: 15
Total Ticks Caught Overall: 2,852 Ticks
Average Ticks Caught Per Contract: 98 Ticks
Long vs Short: 10 Short, 5 Long
Average Initial Margin: $9,049
Average Hold Time: 1.53 Days
Average Gain: $2,017
Average Loss: $103
Total Gain: $24,207
Total Loss: $308
Winning Percentage: 80.00%
I am well aware that this is an infinitesimally small time period to base a trustworthy track record on, but I’ve backtested it (by hand) over several random time periods over the past and it continues to work just as well dating as far back as 2014, which is as far back as I have looked thus far. I’ve also found that it works on all timeframes, but haven’t formally hand tested the 3YW or 1YD timeframes yet (my clients prefer short-term trades). I’m also well aware that I’m vastly overlevered in some instances, but I’m not particularly concerned with position size as I’m really just trying to convey my strategy’s efficacy. I just started with an arbitrary number that my paper account was already at and ran with it. If I can maintain similar results for a year or so, would a shop take these brokerage statements seriously? I just ask this early on because I don’t want to continue to go through the trouble of monitoring this account if it’ll be all for naught. I’d appreciate your input.
shorttheworld
Trade. Don’t tell anyone. Profit.
you need to include max intra-trade drawdown. so, if you buy 1 contract, then it goes in your face 60 ticks, then comes all the way back and then in your favor 40 ticks, then retraces 20 ticks and you exit for a 20 tick gain...yes you made 20 ticks, but you took 60 ticks of heat and left 20 ticks on the table...and this is the more important statistic that you have neglected to include. With this (i would want to see a bar chart of every trade with 3 data points for every trade....max drawdown, max profitable excursion, exit).
i think TraderVue does this for you...i would expect you to be using this...and if not,then i would wonder "why not" and ding you.
Thank you for the constructive feedback. I’ll get right on that. What I will say based on real-time experience with this strategy is that there’s pretty minimal intratrade drawdown. This strategy is partially momentum and partially trend-based, so I rarely ever see any red on my P/L at any point in time, and if I do, it’s never more than 10-15 ticks. I’ll follow up with concrete numbers though.
Okay just imported into TraderVue. From 3/20/20-4/15/20 Overall Profit Factor: 7.77 Average MAE: -125.7 Ticks Average MFE: 542.5 Ticks Largest Gain: 1,105 Ticks Largest Loss: -199 Ticks Average Winning Trade: 363.1 Ticks Average Losing Trade: -74.8 Ticks
What do you think?
Knowing your avg.MAE/MFE, your stats are great for the moment. Now we have to know : - Which Assets you traded ? - What are the current market conditions of these last (IV & Std.Dev)
Of course, you have to know that in Trading only a Long time track record is relevant, otherwise, that can be luck.
Thank you! The asset is commodity futures. I trade everything pretty much: equity indices, currencies, metals, energy, and treasuries. I’ve replayed it on OnDemand picking and choosing random months (I trade on 20 day 1 hour) dating as far back to 2014 and right up to January of this year and the outcome is very similar. This tiny time period is just the only period I have actual broker records for. If I can keep this up in a similar capacity for say a year or so do you think a prop shop would take me?
It's not easy to say because your equity is maybe too small (...) What will be your PnL & Risk Management with a 200K ? 1000K ? account ? But of course, if you are able to continue on this way you have a good chance to join a Prop Shop Firm.
I guess that’s where my main roadblock comes into play. I’m pretty much entirely self taught so I have no clue what proper position sizing is supposed to look like in a large account for proper risk management. That’s why I chose to break this down by ticks instead of dollars. I’ll start doing some research, but I would really appreciate it if you could point me in the right direction to begin.
keep trading this way for a year, and you won't need to join a prop firm./..you'll make enough to just trade for yourself. check back in with us in 3 months with updated stats and we can have a convo
That sounds great, I will keep plugging away and reach back in a few months. Thank you all for your guidance, it’s been valuable and much appreciated.
also, what is your ratio of initial margin $ vs account $ ?
if a contract has an initial margin of 10k, and you have 50k in your account, and you trade only 1 contract, they you are 20% margined. What % margin are you running?
also, make 2 bar chart of P&L and post 1 - daily P&L 2 - each trade P&L
some trades last more than 1 day..and you might take more than one trade in a day...so you can see how these won't necessarily be the same. it will help us understand your P&L volatility. if you are trading spreads, then this will be more dificult...but it sounds like you are trading outright direction, so it should be pretty easy.
also, you need to be, at a minimum, be paper trading in an electronic account (but ideally, in an account with real money). if you just journal trades in an excel spreadsheet, i'm sorry but that's not enough...you need some kind of documentation external from yourself...there is just too much temptation to cheat (i've seen people create 64 paper trading accounts,and then go in opposite directions in half of them, and repeat with the winners, cutting in half each time...to create what looked like a string of 6 big winning trades). This is why we usually either require a real $$ account to prove you are doing what you say...or publicly post trades onto a platform that you can't delete (so, an email list would work for this where you reply to your own gmail and create an easy chain of paper trades to read thru...but not twitter or stocktwits...cuz...deleting happens)
You seem to know your stuff. Saw you on another thread and was wondering how long you’ve been day trading on your own and what all you trade?
This is all extremely useful information and is very much appreciated.
All of my trades are through TD Ameritrade’s ThinkorSwim platform under a profile I’ve owned for about 4 years, so I hope that would remove suspicion. If not I would be happy to login to a laptop and pull and export the broker records to TraderVue right there in front of someone if I get the impression they’re serious about hiring me.
As far as the leverage goes, I really just started with the number my paper account was already at and ran with it. Average initial margin I’ve chosen is 9-10k, but truth be told that was mostly arbitrary. I’m self taught and have no experience with large accounts, so I don’t know very much about proper position sizing when it comes to properly managing risk. That’s why I’ve chosen to display these stats through the lens of ticks. Do you have a suggestion on leverage % I should be sticking to?
"correct" leverage really depends on drawdowns. if your system only sees avg 10 ticks of drawdown, then you can and should use more leverage vs a system that has an avg of 100 ticks of drawdown.
for reference, most hedge funds / prop firms have a concept of risk capital and max drawdown. regardless of the actual number, you can work off a %. if 10% of risk capital is the max a firm allows a trader to lose before firing them, then you can do the backwards math to workout how much you can lose to determine how much leverage you should use.
since most firms will fire you if you lose 10%....then you need to calculate the largest you can trade, where you will never hit that drawdown. assuming S&P futures (ES) and your max loss of 200 ticks ($50/tick)...that = $10,000 on you account (assuming it was a 50k account)
So, that means with just 1 contract, you would have blown thru your max loss hitting a 20% drawdown and been fired. that is no bueno.
Most prop firms and hedge funds don;t want to see you risk losing more than 1 - 0.5% per trade.....certainly not more than that in your backtest / interview period.
So, you are taking WAY too much risk for most professional firms. Now, if your tick is the min increment (what i think of as a quarter tick...so $12.50/tick) than you are better...but still...losing 5% on one trade (even if it was your worst) means that you have really bad risk management vs position sizing in your account.
taking a 200 tick drawdown....what was your stop loss? do you have a stop loss? you should have a stop loss level ready before you enter a trade...and if you don't, i'm not aware of any prop firm that will hire you...because it means you are willing to put the firm at unlimited risk. While i understand that in the old days, many hedge fund managers would have 20-30% swings before making it all back and then some...the appetite for that in a new trader is zero.
Would you be able to describe what type of shop you're at and what you mean by broker? Are your clients retail HNW or institutional? I'm thinking that starting your own CTA could be an idea if you can bring your clients with you. You'll essentially be running your own little HF. Would love to hear other's opinions on this as I'm just a college student.
I appreciate the input, but if I ever go out on my own, it wouldn’t be until later in my career. I’m 26 at the moment and my Wall Street career is still very young. Plus, though I feel good about the performance of my strategy so far, I feel I still stand a lot to learn from time-tested and proven traders.
I think I’ve decided that I’m going to trade my own account and put my money where my mouth is to provide a truly concrete performance record. It’ll have to be a very small account, but I think rather than adjusting position size for risk I’ll have to adjust risk through ticks.
ironnchef , if I told a prop shop that I was trading live despite compliance telling me not to, even for the purpose of proving myself on a small account, would I get dinged in an interview for that?
this is information that you should simply keep your mouth shut about.
you should just say, "here is the performance for my strategy over the past 12 months...and you can see the track record on collective2 at this link..."
you should not mention anything about your current firm...also...if your firm is on the larger size, then you shouldn't have a personal broker account in your name....they will find it eventually....i suggest trading in your parents account or a friend or something like that if you are using real money. Don't risk getting fired from your current employer.
Hello ironnchef , I know I disappeared for a while, but I’ve been very hard at work developing further strategies and for a while job hunting as unfortunately, my company was devastated by the economic implications of COVID, and I was laid off. I am at a new company now, however. Anyway, I digress.
I developed a new strategy entirely separate from the one I created this thread for, and I hired a software engineer to put it into code. I just got some preliminary backtest results I was hoping you could help me interpret. Please bear in mind this strategy is designed to trade commodity futures as one of the biggest edges to this strategy is that futures trade 24 hours, but I only had a TD account at the time and they only allow one-month historical data on equities and nothing on futures. I am in the process of opening an Interactive Brokers account that’ll allow me to backtest futures for the entire year of 2020. Anyway, here are the preliminary results of this strategy on AAPL for August 9th-September 9th. Though it wasn’t designed to trade equities, I feel the results are encouraging. They came up as follows:
Chart Timeframe: 20 day 1 hour
Trades per day avg: 2.77 long, 2.88 short
I’m having an issue with entries and unnecessary reentries being triggered and I’m trying to work my way through that, but regardless the commission costs are currently not overwhelming at all, especially if I ever get to the point where I’m trading decent size and am in the position to negotiate rates.
Winning Trades: 58.33% long, 49.33% short
Once again this metric is a bit misleading because of the unnecessary reentry and immediate exit issue, but regardless seems sustainable
Avg Profit Per Winning Trade: 0.547% long, 0.723% short
All of these metrics are conveyed as a proportion of the overall portfolio, so for a $100k account, an average long winner would be $547 and an average short winner would be $723
Avg Loss Per Losing Trade: 0.207% long, 0.210% short
This seems that the profit factor would then be 2.64 for longs and 3.44 for shorts
Max Profit: 6.55% for longs, 1.67% for shorts
Clearly longs have performed better for this particular month, but with AAPL reaching all-time highs and practically going parabolic, this is not necessarily surprising
Max Loss: 0.832% for longs, 0.696% for shorts
This would make max profit factor 7.87 for longs and 2.40 for shorts, and even assuming an absolute worst case scenario of both of my biggest losers coming on the same day, would be a max drawdown of 1.53%
Average Candles Per Trade: 2 h:15m:49s for longs and 1h:08m:12s for shorts
This is not an HFT strategy, so with access to unfiltered CQG data and an excellent internet connection, which I do not currently have, the fills on these positions are extremely attainable
Avg Candles Per Winning Trade: 3h:16m:12s for longs and 1h:30m:17s for shorts
Avg Candles Per Losing Trade: 51m:16s for longs and 46m:41s for shorts
This follows one of the foundational adages of trading, “Let your winners run and cut your losers short”, and with my winners lasting 2-3 times as long as my losers, it seems this strategy adheres to this concept
And most importantly....
Overall P/L for Aug 9th-Sep 9th: +33.48%
P/L for longs: +27.91%
P/L for shorts: +5.58%
To a critic one might say the profitability on longs makes sense as AAPL is reaching all-time highs and seems to continuously rage on, but what I feel illustrates the robustness of this strategy is that even with a sub 50% win rate and AAPL going parabolic, this strategy still returned over 5.5% going short. As mentioned, this isn’t even the asset class this strategy was designed for; about 60% of the trade opportunities for this strategy trigger from 7pm-5am, so it’s a much better fit for futures. This backtest does show implications of cross-asset functionality however. This strategy also functions quite well on the 1YD, 180d4h, and 3YW charts, but I don’t have the time or resources to run a formal backtest on those. I will post updated results once the IB account is open and a longer-term backtest is run on NG and ES. For now though, what do you think?
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