A movement of one point on the index results in a gain or loss of $A25. Commissions are $A5 each way. As you can see though I am profitable I'm only gaining a few points of movement a day. If I was prepared to give trades more leeway I could capture a lot more points. As the following statistics show I am averaging about $A250 a day, which is pretty much my medium term income objective:
But there is the potential to make much more. Mostly also I only made trades in the morning while some big moves happened in the afternoon. The trades also average out over each day, so that I only had one losing day and then only lost $A20. On average I made $A80 per contract or about 3.5 points. The z-score (t-statistic) for individual trades, which tests whether they are significantly different from zero is 2.21 and for daily totals 3.42. In both cases, based on the sample, the probability that the results are random is very low. I won about 3/4 of trades but am still seeing the average loss on losing trades being greater than average gain on winning trades.
This chart shows my "equity curve":
My Nikkei trading over this period has been even more successful, though it made far fewer virtual dollars. So what is the problem? This chart of all my simulated SPI trades shows what the issue is:
The first trade on this chart was made on 10th December. Things went well until two days of bad losses around the turn of the year. What happened then? I lost control, pulled stops and traded two contracts at once. In other words I blew up. The sample since then is relatively small. How do I know that I will retain my discipline with real money and not blow up again? The z-scores for the entire period shown on the chart are around 1.30 which leaves a moderate probability that the results are purely random.
You're probably wondering what the red line is. That's what the equity curve would look like if I had honoured the stops and not traded an extra contract.
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