22 Sep The ES Savings Account (Most Profitable)
The ES Savings Account (Most Profitable)
Sept. 22, 2023
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This week we’re discussing one of my obsessions: using our trading account as a savings account.
I’m obsessed because this is one of those universal concepts that’s guaranteed to work.
Without a doubt, if we continually add money to something that makes money, we’ll be rich.
And the example that started us off was a successful financial expert who says he uses SPY as his savings account. And we learned that buying more SPY with free cash from 2013 to 2023 turns a hypothetical $10k into $89k.
But, again, why SPY?
Doesn’t he know SPY doesn’t always make money? Doesn’t he know that the S&P 500 has losing years all the time?
I don’t know a single trader that would use a trading system that has had that many losing years and that big of a drawdown. But it’s SPY, so somehow that makes it okay? It’s mind-boggling.
Anyway, in our last Newsletter, we looked at three other options that use the same concept and make a lot more money. (And it wasn’t hard to find three. Anyone could find ten more in just a few minutes.)
But what if we went another way?
What if we used a trading system instead? Specifically, what if we used a simple portfolio of 3 trading systems?
For this example, we’ll use the Futures portfolio that’s on The Performance Page. This uses 3 systems on the ES (E-mini S&P 500 futures contract). We’re still using the concept of “the market” like SPY does, but we’re using systems instead of buy-and-hold, and we’re using leverage to hopefully make more money.
For all the details on these 3 systems, you can watch the video HERE.
To get started, I dragged all 3 systems into Portfolio Architect. Then I downloaded all the trade data into a spreadsheet.
I started with the same hypothetical $10k account. It could be higher for more safety but I wanted to make it an apples-to-apples comparison. Every trade uses 1 contract, at first.
When the account doubles, though, I decided to double the contract size. So, when the account gets to $20k, I will use 2 contracts on each trade. When it gets to $40k, I will use 3 contracts. When it gets to $80k, I will use 4 contracts.
And if I get to $160k, I decided I would stop. If my hypothetical account got that high, I wanted to drastically lower my maximum drawdown risk.
Using the results from Architect starting in September 2013, here’s what I found.
The hypothetical $10k account doubled in August 2014. I used 2 contracts after that:
Then my $20k account hypothetically turned into $40k in March 2015. I switched to 3 contracts:
$40k hypothetically turned into $80k in May 2016. I then used 4 contracts.
And $80k hypothetically turned into $160k in August 2017. From this point on, I stayed with 5 contracts. If the account grows from here, then my overall risk gets lower with each passing year.
How did it finish? Keeping the contract size the same, here’s where the hypothetical $10k account finished in September 2023:
The ES futures savings account would have hypothetically gone from $10,000 to $924,000.
That’s 10 times better than using the SPY.
And, remember, I stopped compounding in 2017. It could have been exponentially higher.
The concept of using trading as a savings account is an earth-shattering one.
The only thing holding us back is this question:
What do we trust enough to trade for the next 10 years?
If we can answer that, our financial future looks bright.
Talk to you soon.
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.