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22d (edited) • ❓Q&A
The biggest mistake i see futures traders making
When I first started algotrading futures
I'd watch my algos
And I noticed that they'd trade about 5 times a week
But sometimes algos would buy at the top, and go short at the bottom.
I'd think to myself:
"Man, these algos get in at the EXACT wrong time. I can trade better than THAT."
So I'd load up a chart on the side, and when I saw an algo take a bad trade...
I'd reverse the position.
"wow I just avoided a -$1k loss by overriding the algos."
I kept at it, glued to the screen for hours every day.
Scalping little wins here and there. +$50, +$100 per win
I kept my losses small, and as soon as I saw money on the table...I'd take it.
"I'll never go broke by taking profits"
I'd say to myself.
This scalping style of trading was so time consuming though.
I'd be out and about, and instead of being present with my friends and family...I'd be checking the markets on my phone.
But by the end of the week, my 20+ hours of work had paid off.
I had out performed the algos by +$2k!
At 40 hours a week, thats $16k/mo! I can be a full time trader!
I continued at this for months, but after 6 months of grinding away...I noticed that for some reason
My account wasn't growing as fast as if I had just left the algos alone.
But then I looked at the commissions & fees...
My trade count: 6677
Algos trade count: 50
At $3 commission per trade, I had lost -$20k in FEES ALONE.
My stomach dropped like a stone.
All that hard work, 1000s of hours I sacrificed.
All to just break even.
No, actually I lost money because the algos were up on the year had I left them alone.
I was kicking myself. How could I be so stupid.
You see, scalping made sense to me when I was working as an employee in corporate America.
I was used to a steady paycheck biweekly.
But trading doesn't work this way. Its simple statistics.
Most of the returns come from outlier days.
I was seduced by the high win rates of scalping. But in reality, scalping strategies cost 100x more in fees.
The win rate was a vanity metric, I didn't care about have a high win rate anymore..
I just want to make money, without staring at charts all day.
This is why I developed my swing algos. Low trade count means low fees. And high expected value. The trade off of swing trading is lower win rate (20% to 40%), but I'll get a few massive wins that make up for many losses.
I couldn't wrap my mind around at the time, but now that I'm a business owner it makes sense.
If I need a steady paycheck, I'm in the wrong business.
Trading, like business - when done properly:
Results in a couple huge chunks of profits which makes up for many small losses, when taking asymmetric bets.
If I want steady paycheck, I should just go back and get a 9-5 job.
But if I want complete time and location freedom, and growth potential. Then I need to be ok with less frequent, but bigger wins.
So from my experience, swing strategies are WAY MORE PROFITABLE than scalping strategies over the long term.
Combine w/ algorithmic execution to create the easiest, lowest effort style of trading for the highest potential upside.
As promised, money in under 5 mins.
Keep crushing,
Kevin
6
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The biggest mistake i see futures traders making
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