I posted regularly that summer in EliteTrader's 2007 P/L thread. I had a profitable streak going and increased my trading frequency and my results followed along. In the 4 weeks prior to 8/29/07, I had made $250k in profits from my trading so was trading "with the house's money" and felt I had enough capital to increase my starting position size from 2 contracts to 3. So that's what I did the morning of 8/29/07. I was up nearly $6k by 12:55pm, when I began shorting the market and averaging in until the "uncle" point nearly an hour and forty minutes later. It took me just ten minutes to buy back my 400 contract short position and realize a $137k loss.
See 8/29/07 post in P/L thread
I remember feeling shocked at the time but didn't expect it to happen again for a long time. I rationalized it in my head that I would gladly give back 100k every time I make 300k in the time span of 6 weeks!
I had a couple other "smaller" drawdowns before throwing in the towel.
That pretty much sums it up and is why I will always remember August 29th each year! We are all products of our experiences and that summer I experienced a few years all at once.
Posts
Wow, -$130K...that's one hell of a day man! It only took $1,500 on 10 contracts for me to learn my lesson of NEVER averaging into a LOSING position! That's a very impressive come-back on the Equity curve!
ReplyDeleteSo how do you manage to trade 1-2 lots when you've traded much larger size in the past? Is this just "practice"? 400-lot is a HUGE position for a retail trader!
You are saying you started with 3 contracts and you averaged it down all the way to trade 632 contracts? how often did you average it down, and did you double contracts traded everytime time you average it down? did you average it down every 5 points?
ReplyDeleteThank you for your answers.
Jorge
I can remember that very few people believed that you were trading an account that size. I seem to remember a post that you made about posting PnL's. The numbers really don't matter, whether it was +$200 or +$20000, at the end of the day your strategy either worked or it didn't.
ReplyDeleteI, for one, always thought you were legit. But now I'm starting to think I should be adding a couple zeros to your PnL posts here on the blog! :-)
yes I remember it well after that you stopped posting and left. Are you still avg down but on a much smaller scale?
ReplyDeleteThanks for the comments.
ReplyDeleteE-Mini, trading 1-2 lots is no problem and beats sim trading any day to maintain reality! Most of time in summer '07, I could count on 1 hand the number of times I had to avg. up to even a 100 lot position (still big but that 400 lot was insane)! As mentioned in past blog entries, I am very patient and am in no hurry to find my future "edge." That said, I'll be shocked if I EVER trade that big of lot size again. But if my results ever do get consistently profitable again, I will ramp up size.
Jorge, that day 2 years ago I started with 3 and ended at 400 (632 was total traded that day). I did not double each time I averaged in, it was more like 1.3 times and was every 1-2 pts. that I added. As they say on TV, "don't try this at home!"
DT233, I wish I could add a couple zeros to my P/L here on the blog on my good months and deduct a couple on my bad months! LOL - I did have my skeptics, that's for sure!
Cory, I do occasionally average down ("scale in" is a better description now), but I normally limit myself to 1 add max. on original position and have a stop on every trade. You can't perfectly time your entries so as long as original reason I got in a trade is still there with the market being a point or whatever against me, I think it's fine to add once to get to your full position size. However, any backtesting I've done of this kind of strategy, results come out the same as if you just put on a full position at original entry price for every trade. 6 of one, half dozen of other...
I have tested just for the heck of it averaging down every 10 to 15 points, depending on the volatility of the market, and each time I averaged down I would double the number of contracts. I would always start with 1 contract. A couple of times I got to 100 contracts, but most of the time I had smaller positions. What is hard about this, is the amount of stress you go through to even deal with such position growth in a matter of minutes, maybe hours. I think it very draining to deal with this on a daily basis. The rewards were great and I didn't blow my Sim account the time I did this, but that could probably happen one day. I could never convince myself to do this live.
ReplyDeleteGood luck on your trade, and keep up the great work.
Jorge
Wow! 1st time reading this post.
ReplyDelete