Noticed - Law of Doubling

Since I couldn't sleep this evening, not quite sure why, I decided to just get up and see how the futures were doing this morning. Things are looking pretty negative in Asia and Europe. Currently at 2:45 am MST, there is bearish divergence of the RSI and things are hovering at the 50 EMA on the 15 min. chart.


Today would be a great day to trade, however, it's my son's 5th birthday and I promised his teacher as well as him I'd help out in his class as well as bring wonderfully healthy donuts to class. It was suggested that was better than cupcakes full of frosting.


One of the things I do not get is I make very healthy baked goods filled with wonderfully natural ingredients that are whole, healthy, gluten free and refined sugar free, yet tasty and doesn't leave you feeling hopped on on sugar, but rather a sense of good well-being. I'm not allowed to bring stuff like that in, but I can bring store bought cupcakes ladened in refined sugar, processed white flour. Go figure. Something about liability and kids being allergic to stuff.


Honestly, does that really make sense?


Anyway, I digress. Things have gotten busy with my children and their school and they are the priority over keeping up my trading blog. My kids started gymnastics last week. In a couple weeks, they will be starting soccer, and at the end of September, swimming. On top of their homework, school projects, and these sports, I think it's enough. Thought about integrating teaching them piano, but, that may be too much.


Anyway, it seems in the last day, my $200 trading account blog entries have been quite popular. The key here is if you can really manage your emotions, have a good trading strategy that can get you the profits, you can really take a small account to a very large account in a relatively short amount of time.


The one thing about the $200 accounts is as you get the accounts larger, what I didn't understand nor did was I could've done the law of doubling instead of actually investing more time to trade. Not sure if I wrote this down or not in the $200 accounts, but until the accounts exceed $25K, if you use margin, you cannot daytrade more than 3 times in a 5 consecutive period.


Now, as you might notice, I did trade more than that. What I found is that certain brokers will allow you to do that if you have an all cash account, meaning, it is not a margin account. So, those $200 accounts are strictly cash accounts and I converted them to margin accounts after they exceeded $25K.


Not all brokers will allow you to do that, so you must check with them to see if you can do that or not, otherwise, you will not be able to grow your account as quickly. But, hey, even if it took you 1.5 yrs to take a $200 account to $30K, that's still quite some return, don't you think?


However, since trading those accounts, I've learned a lot more stuff. My technical analysis has changed someone, as well as my knowledge. Tweaked, might you say.


One of the things about trading options is you always have option buying power. Now, I don't know if you exceed $100K whether this is still valid or not or if you have some million dollar account, as none of my accounts exceed those right now. They will one day.


What I've found is leverage is very important in being successful. I'm finding though options allows me greater leverage than stocks, I'm finding futures, if you can properly manage your risk, has even greater leverage. Granted, I do not know of a place where you can open a $200 Futures account, but even for just a mere $2500, you can open a futures account and begin trading that money.


My philosophy is even if you have the money, it does not mean you have to trade the whole amount. Right now, I'm still on trading 1 contract. 1 contract in 1 hour of trading, I can typically make more in that 1 hr that can provide for my living.


A question was asked to me by another trader do I take that money out to actually live on? Right now, I do not. Though I have more funds, since I am overall still fairly new to futures, I think it's best to only have a minimal amount to trade with and see what I can do with it over the span of a few months. And, by that time, if all goes well, the account size should be decent size to where withdrawing should not make much of a dent. That's my plan.


Where do I get my funds to live on? They are from my other trading accounts.


Do you need to make thousands in a day to live on? Well, if you "lose" thousands in a day, the answer is yes. Meaning, if you basically mismanage your trades. Yes, "stuff" does happen, but most of the time, it's really due to mismanaging your trades, like not setting your stops (for profits and costs) or not correctly setting your stops, trading emotionally or when you are distracted.


Otherwise, if you manage your risk well, look for quality trades, just in the demonstration to another trader just in a 1/2 hr period, I was able to with 3 trades take $350 off the table, less the $11.97 in commissions it cost me. This was while chatting with him. More could've been taken off the table, but I didn't. I was following my trading plan and that's what it allowed me. Nothing great happened in the market during that time, like it was not making any big moves. In fact, it was just consolidating.


If you trade for 40 weeks for only 1/2 hr a day, making $350/day, that's $70K. Could you live with that, only risking $500 for each trade? That would give you 12-weeks of vacation. What if you wanted to trade for 1 hr a day, making $700/day, that would be $140K/yr. Many people do not even make close to $70K, much less $140K/yr, especially on such little work.


What if you wanted to make more than that, but you didn't want to spend more than an hr or half an hr a day trading? Instead of using 1 contract, double the number of contracts to 2. So you could make $140K/yr in just a half hr a day with 2 contracts.


Now, I'm not suggesting anything, but for myself personally, I would want to make sure that I was really, really good at trading one contract before moving onto 2 contracts. How many trades is that? I'm thinking anywhere from 2 weeks (which I think is too short) to 2 months is a good timeframe. If one can every day for let's say 1 month take $350 in half an hr or so, then in month 2, you can use 2 contracts for that same period of time. When you get really good at 2 contracts, double your contracts to 4.


So, instead of making $700 in half/hr, you're now making $1400 in half/hr and that equates to $280K/yr. You haven't increased the amount of time you spend trading, just the size of your position. You didn't increase the size of your position until you became really good at the smaller size and doing that consistently. You managed your risk in every single trade by appropriately setting your stops and getting out of costing trades quickly.


Just for grins, starting with a $2500 Futures account that allows you $500 per contract to trade the emini's, let's take a look at what could happen in 1 yr.



Oh, why are there 13 months? This is not a baker's dozen of months. There are 52 weeks in a year and if you divide it by 4, it turns out to be 13 equal months. Maybe someone was superstitious and didn't want 13 months, so they made this confusing 30, 31, and 28/29 days thing. Yes, someone can educate me on this if they'd like.

Those 3 months of "vacations" would include all federal holidays, so you can count every 20 consecutive days you trade. Whatever, right?

How I have this broken down is assuming it takes you an average of 4 trades a day to make $200 ($50/trade) and each trade costing $3.99/contract roundtrip, the final figure after 10 months of 4 weeks/month, you'd have nearly $4M. That's assuming you don't take any money out during that time, but even if you did, that's what you would've made.

It's basically taking 1 point on the ES per trade if all your trades are profitable. This really is more an average because you may be making $275, but give back $75 to net $200.

So, you're not a actually working harder or longer, you're just working smarter. Sound like a plan?

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