Wednesday, April 23, 2008

Back to Square One in Futures Trading

Don't pass go and don't collect £200.

That was a phrase on one of the cards in the Monopoly Game we played when I was growing up. After a year and a half of futures trading I'm pretty much back to square one, moneywise, at less than $200 in profit. At one point I was up $9,000, though I was also down $2,000:

I've lost trading all contracts apart from the NQ E-Mini NASDAQ.

This month, though, I'm losing in them and doing OK on the other contracts. In the meantime, I've been doing OK trading stocks and options, which has turned around my trading performance in the last few months. I'm going to keep trying. I know what to do, but still am not quite doing it right. Most of this month's loss was in a single trade on 1st April where I completely lost control. I've been reading the story of Jesse Livermore. He blew up many times, early on (and apparently later), and kept coming back. I haven't blown up that bad, but I haven't been up in the way he was either, because I don't take those kind of risks.


BackOfficeMonkey said...

Sorry to hear about the drawdown. I'm just curious but what type of risk management system do you use? VaR? Monte Carlo sim? I remember you said you run OLS regressions to predict future price movements, have you identify some sort of mean-reverting process to trade off of?

mOOm said...

The model isn't OLS - the model is fine, it's my trading that is erratic - sometimes I'm scalping, sometimes I'm trying to do longer daytrades - sometimes I have stops, sometimes I don't, sometimes I'm doing the position day trades the model says. It's a mess. I'm beginning to think that I need to do scalps and position trades, the former with a large position and the latter with a smaller and try to avoid longer day trades. It's those trades that normally blow me up. I think I am learning. The Aussie futures contract is too big for me - I set a close stop to avoid losing much but then lose anyway when I get stopped out. But trading Aussie stocks and warrants is expensive though I can trade as small a position as I like.