DO NOT DO THIS!

Sept. 20, 2024

DO NOT DO THIS!

This week we’ve been talking about a simple pullback strategy on the YM Futures contract.

And here’s my idea.

I want to go all-in on something.

In tennis, I found techniques that worked for everyone all the time, and I relentlessly worked on these with my students.

It never failed me or them.

So what system can I use and go after aggressively?

I think about this every day.

Is there a system trustworthy enough to really go for it?

How about the YM strategy this week?

Remember, it has this Curve trading 1 contract and taking out trading costs since 2002:

And the methodology seems timeless.

Get in on pull-backs using an index’s upward bias. Go for short wins. Use a wide stop to get a high win rate (because a high win rate increases the possibility of winning a few trades right away.)

It seems reasonable to believe in a system like that.

DO NOT DO THIS!

And when I dig into the numbers via Portfolio Architect, here’s what I see.

The max drawdown for the Micro YM, the MYM.D contract, is only $1,086.

And the margin requirement for MYM is under $1,100:

Do you see where I’m going with this?

DO NOT DO THIS!

What if I traded this on a $1,500 account?

What would that bring historically?

Here are the Annual Returns:

In four of the past six years, trading on that size account would result in about a 100% gain.

And the other two would have hypothetically returned 24% and 65%.

DO NOT DO THIS!

Granted, a bad drawdown would decimate almost all of the account.

But that’s why I would start with a small account and keep another $1k or so on the side to replenish if the drawdown happened right away.

However, the 94% win rate leads me to believe that a drawdown out of the gate isn’t that likely.

And if it does work, then I’ve turned a small amount of money into a much bigger amount. The upside is large and even losing the whole account would be reasonably small in comparison.

It would be that “positive” reward-to-risk that experts love so dearly–but on an entire account level, not an individual trade.

The questions?

• Is this system trustworthy enough?
• Will the Dow become less volatile and not make as much going forward?
• Should I start with more money?
• What about going all the way and starting with only $1,200?
• Is a mistake to trust this testing with such a “negative reward-to-risk” ratio?

Those are all valid, and this might be a moronic idea.

But I’m intrigued.

DO NOT DO THIS!

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.