Yesterday I went over my trading goals with my risk manager (who’s also my wife). She was a little concerned about my lack of progress. I think I’ve made a lot of progress considering I completely changed my trading plan 2 months ago and last month was my best day trading month ever. But the bottom line is I’m not still making what I made doing my software architecture & development consulting. So I came up with a plan for the upcoming months.
The main metric I am tracking is my avg profit per contract per trade (trade expectancy per contract) and the net profit per day. The first is important because I want that to be efficient and averaging just 2 ticks is not efficient. I need to fix that before piling on contracts. The second is important because ultimately that’s what measures our income each month.
Phase A (in progress):
1. Increase my avg profit per contract 50% from $20 to $30. Result will be increase from $250/day to $375/day. Last week my avg profit was $27 so I’m making progress here.
2. Add a second market to increase trade opportunities by 50%. Result will increase from $250/day to $375/day. I was hoping to use the Euro so I could trade the same market all day but it has proven to be too volatile for me. So I’ve chosen EuroStoxx for the european morning second market and took my first real money trade today. For the US morning session I am currently looking at the 10 year notes. I’d like something liquid that is similar to ES, unlike Crude & Euro which are volatile and move totally different. TF is out because it’s too correlated to ES and it’s volatile. So 10Y Notes seems like a good choice. It’s slow which gives me time to think.
The two above combined will result in an increase from $250/day to $560/day.
$560 is approximately 2/3 of my IT salary per day & $122k/year. This would be excellent and if I never improved beyond this I could still live a comfortable life. Maybe not in Paris but somewhere where housing is cheaper.
Increase my avg profit per contract 33% from $30 to $40.
Result is increase from $560 to $750/day which is approximately my IT consulting salary & $163k/year.
Increase contracts from 2 to 3. 50% increase. Result is increase from $750 to $1125/day surpassing my IT salary & $245k/year.
Increase contracts from 3 to 4. 33% increase. Result is increase from $1500/day which is $327k/year.
Continue increasing contracts & avg profit per contract. It will be easier to increase avg profit because I’ll be able to scale out more and leave a runner for the big winners. I figure by the time I get to this phase I’ll be quite happy with my income, will have a lot more experience, and will have plenty of time to improve without stress or pressure.
There is a catch in these results: By going for a bigger avg profit per trade I’ll be looking for setups that have bigger potential. That means fewer trades. I’ve been overtrading as it is which explains why I’m averaging just 2 ticks/day. So the above figures could be off by say oh 25%. I don’t need to be exact at this point.
Napoleon Hill and my former project managers would advise me to put dates on these milestones. I’m going to have to think about that because I don’t want to rush myself but at the same time a little pressure is good, if not Parkinson’s Law says I’ll take forever. Which is kind of what has been happening as I’ve been trading 2 contracts for 7 months now. It’s time to take it to the next level. So let’s say 1 month per phase and see how it goes.