Midir's Stock Market Challenge: Day 5

Results For Today

Trades:1
Total Contracts:2
Winners:1
Runner: +3 Ticks
Scratch: 0
Losers: 0
Profit: $125.82 after commission
Gross: $137.50

Commissions

Commissions make trying to make a living off the ES extremely difficult, especially when you are trying to scalp.  I currently pay $5.84 per round trip on the ES, and slightly more on the CL.  While I've thought about switching brokers, I don't like the fact that a lot of them have extra hidden fees.  For example, one of my money management strategies is taking profits out of my account at the end of every day.  Some brokers charge $25 dollars per withdraw.  Other have hidden platform fees, and on some your forced to pony up a grand for the ninja trader platform.

The problem with commissions is that you need to factor them into your profits! You cannot simply ignore them.  In theory, if you have a strategy that gives you a 51% chance of winning a point, and 49% chance of losing a point then you should be turning a profit.  When you factor in commissions, then you realize your going to be losing money until you win 56% of your trades.  Even then, you will be making an amazing $16 dollars over the course of 100 trades!

You would need a scalping strategy that wins at least 70% of your trades if you really want to start making some money.  Then it just becomes a matter of increasing your contract size to make even more money.

Now those of you who are trying to scalp just one tick need to be psychic or just some of the luckiest people on the plant.  These types of traders are only really making money for their brokers.

On the other hand, commissions affect you less the more ticks you make per winner.

The trick is to increase how money money you win per trade without destroying your win/lose ratio.  I personally use a two contract system.  I use one contract to scalp one point, and then I use the other as a runner.  Since I started this blog, I've only had one small runner.  Now if I took the very next second entry, then I would still be in the trade with a 20 tick runner.  It's all about fine tuning, and trying to get the best of both worlds.

Sit down and do the math yourself.  If anyone wants a copy of the spreadsheet I use, feel free to leave a comment below.

Runner Runner! Missed Trade of the Day!

I turned the TV off for the day, and instead watched a few trading videos on YouTube. They are just the right amount of distracting and boring to keep you focused on the market, but not so boring that you want to rip your hair out!

The market was a bit all over the place today, and I still passed on a few trades that I saw earlier. All of them would have worked out! I viewed today as being pretty similar to yesterday. We had a huge run up the after-hours trading, and then a counter-trend channel. Once we had the second break of the channel there was a break-out pull-back long, but it moved so fast I couldn't get in.

Instead, I waited for a second entry.  I got one about 10 minutes later when the price pulled back to the EMA, and I entered with two contracts.  I used the second contract to lower my average cost.  I put my first sell order at my usual one point target, and I put my runner right on the resistance line.  Both my orders were filled.

The way this was setting up, I head a feeling it was going to continue higher to form a new high at the very least.  There was another second entry long, followed by a break-out pull-back long right after I exited my trades.  Did I take either one of them? No.

Anyways, I'm done for the day. Time to get started on my taxes.