Long time lurker, first time poster..with a small account less that 12k, what to do?

PK,
Thank you for this and it has all but confirmed my initial but that the RTT service is where I want to be.?My only reserve and I want to say this without sounding "newbie" or insulting is the limited returns of the strategy vs the time you are in the market with it.. I know it takes money to make money but was hoping (unrealistically more than likely) there was a strategy or methodology that could turn my capital over at a higher albeit faster rate.. as some tout strategies that are near as safe and consistent but return of 3-% per month ..

Hope that doesn't sound arrogant or ignorant
 
I started with FOREX and intraday futures trading to make a 100% per year. A nice dream but I never got to this point in a consistent way and, over time, ended up losing money. With broken wing butterflies and credit spreads, I succeeded in increasing my trading capital by about 40% in 1 year, which is in line with many option traders I know; most of this increase came from 5-10 DTE butterflies and calendars (SPX, VIX, CL etc.) when the market did not move at all during last summer. And once again, I lost almost half of these gains with short-term option trades and oversized downside hedges after the US elections.

I have become tired of these ups and downs. So far, the RTT has been the only setup with which I have not lost money for more than 12 months. And more importantly, I do not spend more than 1-2 hours per day, in the evening after coming home from a full-time job (I live in Europe and this coincides with the closing of the CBOE session), to manage my positions in a relaxed way. You may have seen that the CAGR for the RTT over the last 12 months or so comes close to 20%. And this has happened in a period that has been quite nasty for the RTT, such as low volatility, long periods of up moves without pull back etc.

I am happy with a 20% capital growth per year. If you aim for more, and this is possible of course, you need to increase your capital turnover (go shorter term) and take more risk (go closer to the money and/or steeper risk curves; adjust more aggressively etc.); and have a very solid knowledge of what you are doing (I though I had, but the markets showed me that this was not the case). Anyway, by doing so, be prepared for larger drawdowns, stress and the recurrent temptation to switch to another new strategy you hope to make perform you better. My personal choice is to consolidate a consistent return with the RTT, and stick to this strategy like I did when I married my wife 20 years ago. And, once I have proven to be able to do and have increased my capital to the 100k range, eventually start thinking in complementary strategies.

Posted by Peter M Klatt
 
I will add that, across 75 roadtrip trades I have completed, my average annualized return is 43% according to my trade log. This is an annualized return based on highest actual margin used at any time during the trade and actual days in trade. That averages out to 3.5% a month.
 
As Peter indicated (and, by the way, thanks for all your positive comments) the returns are somewhat dependent on the volatility environment. In periods of slightly higher vol it is not unusual to make 5% to 10% per cycle, with 7% to 8% as the average. Once (and only once, unfortunately) I "hit one" exactly right when SPX dropped into the sweet spot near the tent close to expiry, and I made nearly 22%. in any event, the strength of the strategy (and, believe me, in 23 years as an options trader I have tried them all) is the consistency and positive expectancy which, in turn, are related to the high win rate, low draw down, high profit ratio, and high Sortino ratio. Using ES and SPAN margins for the denominator, the returns are even higher.
 
As Dan's apprentice, I would like to chime in my own experience. I traded my first option contracts way back in the 1970's -- obviously I am no spring chicken age-wise. I got my beginner's luck and made a bit of money, and I thought I really knew what I was doing (buy cheap and sell expensive options). However, after about a year, my streak of luck ran out and I began making money losing trades. Luckily, I remembered what my mother had taught me when I was a kid -- never gamble with money you cannot afford to lose. So I quit trading options all together for some years. Subsequently, I found out why I was losing money. All the professional options traders began to trade with computer models of some sort while I was still using my HP calculator to compute my half-ass binomial model. Then I switched to trading convertible bonds which were more slow paced and less volatile than most future options. Over many years, I had not lost any capital in convertible bonds. But I didn't make much profit either. Meanwhile, I "invested" in stocks using mainly the married put, covered call strategies which also did not yield much, but it helped me to survive the crash of 1987. I was very lucky in 2008-2009 when I was completely out of the market -- not so much out of foresight as being out of money at that time. I was very cash strapped because I had invested all my capital in an start-up business venture. To make the long story short, my investing/speculating career did not yield much even though on balance I had not lost any capital.
Two years ago, I retired and began actively trading futures, stocks and options again. Since I had read a lot of books and research papers over the last 40 years, I am not exactly theoretically ignorant or naive about options trading. I have since tested many strategies with real money (in a small account). I tried selling high gamma expiration-day options. The returns were fantastic when things were going well during the extremely low volatility periods. I was profitable for many weeks on ends. Then a run of bad luck took back most of my profits in a matter of days. Then I tried the James Bittman strategy. Although it was less stressful than the expiration-day strategy, the ups and downs were still too much for my own good at my age. Eventually, I settled on trading butterflies and some statically hedged positions about a year ago. I have been consistently profitable since with an occasional trade of minor loss. But I felt that something was still missing.
Six weeks ago, I signed up on the RTT service. What I have learned from Dan so far is not the basics of trading butterflies which are available from many other sources such as books and free material on the WWW. What I have learned from Dan are the mistakes which I would have made either due to my mis-interpretation of the market internals or my indadequate control over my emotional response to market changes. And needless to say, less experienced options traders can learn much more, such as trade adjustments and risk management, from Dan who is a master craftsman, modest gentleman and patient teacher.
 
Thanks for the kind words, Myron. You have an interesting trading history. I don't know any successful traders who did not, at one time in their careers, suffer significant losses. In the mid-90's when I was learning to trade options with McMillan's book and the DOS version of OptionVue I once lost my wife's entire yearly salary in one day trading OEX options (before the 10:1 split). Needless to say, that was not well received. I recovered most of the loss that year, but the debacle left an indelible memory and made me a better risk manager.
 
The old adage
"Circumstances don't make the man, they only reveal him to himself."
-- Epictetus
can apply in a trading context.
My trading record has revealed that my main obstacles to becoming a better trader are
1. my strong aversion to bearing risks
2. my predominant and strong preference for closure or my aversion to open ended situations
Almost every trading strategy I have tried is hedged, sometimes over-hedged. For instance, all of my convertible bonds long positions were hedged with short stock positions. My obsession with closure often tricks me into over adjustments and over hedging.
Or put another way, "Nothing ventured nothing gained".
My observation is nothing new, such phenomenon is well studied in behavioral finance. But, IMHO, most traders suffer from one form of psychological barrier or another. Only those, who recognize their handicaps and overcome them, may eventually survive. The rest are doomed to fail. Trading is a proverbial Venus trap flower. While the sweet scent of its nectar is so alluring, few flies would have ever dreamed of their ultimate fate.
 
What a great thread, with really interesting replies.

Myron...I love your quote... I think it's a balance between another quote I stumbled upon:

"A Ship in Harbor Is Safe, But that Is Not What Ships Are Built For" John A. Shedd (as you allude to with "nothing ventured, nothing gained"),

and what John Locke is discussing here:



(also Jim Riggio hits the nail on the head 3 minutes before the end of the Kevlar video ... at 1hr20min.. :



For me personally, speculative activities with options form one end of the barbell, as advocated by Taleb, and expanded upon in his book "Antifragile"....with cash forming the other end of the barbell...or, for another perspective, to quote the great Peter Bernstein :)

wise words.JPG
 
In my short time here I have read some great people and it's nice to be made to feel just as relevant as those with 6 figure accounts..While I sometimes get embarassed and depressed there were other places I have been made to feel inadequate for lack of capital..It has been different here...Thanks for respecting that we all have to start somewhere...
 
No worries jrob...

I still hate the sound of a phone ringing to this day....!

Reason: I used to swing trade Australian and NZ index futures back in the late 1980s/early 1990s, and back in those days, you had to pick up the phone and talk to your broker to execute everything, even to move a stop loss...no anonymity via online platforms like today....or they rang you if things were going badly.

Australian and NZ stockbrokers were generally friendly, or at least civil, but the futures brokers had an "Attitude" with a capital "A"...really aloof and judgemental....it was so bad, a friend of mine once allocated one of the more condescending of them some capital to trade, to see if they really were as amazing as they claimed to be...! Long story short: they lost most of it over a relatively short period of time.

Capital Discussions is a very special resource in my opinion....I wish it was around back then!

PS...this is a great read on profit expectations...the opening cartoon alone is hilarious
:)
[/URL] www.the-lazy-trader.com/2016/08/expectations.html
 
Donald said:
What a great thread, with really interesting replies.

Myron...I love your quote... I think it's a balance between another quote I stumbled upon:

"A Ship in Harbor Is Safe, But that Is Not What Ships Are Built For" John A. Shedd (as you allude to with "nothing ventured, nothing gained"),

and what John Locke is discussing here:



(also Jim Riggio hits the nail on the head 3 minutes before the end of the Kevlar video ... at 1hr20min.. :



For me personally, speculative activities with options form one end of the barbell, as advocated by Taleb, and expanded upon in his book "Antifragile"....with cash forming the other end of the barbell...or, for another perspective, to quote the great Peter Bernstein :)

View attachment 2540
Click to expand...

Hi Donald,
Here are some interesting resources relevant to trading psychology.
https://goo.gl/dRE4cg
 
Donald said:
Thanks onyxperidot....good stuff.

Looping back to risk, etc....I just stumbled upon a comment by Vance Harwood (a very experienced volatility researcher)...his advice echoes John Locke's and Jim Riggio's wise words that I posted earlier....see what you think:

View attachment 2541

source: https://sixfigureinvesting.com/2016/10/is-shorting-uvxy-tvix-vxx-the-perfect-trade/
Click to expand...

Donald,
I think Harwood's advice is very sound. I always subscribe to living well within my means, saving as much of my income as possible, and trading survivable positions.
As I had mentioned in another post, I always try to hedge my positions. Unfortunately, hedging prohibits handsome gains After hedging against black swan events with SPX puts and VIX calls, my taxable portfolio return is not attractive. It boils down to a lot of work for very little reward. In my tax deferred accounts, I am restricted to trading mostly collars or diagonal collars which are also low return strategies.
This https://drive.google.com/file/d/0B9fPLkdZBZT6UUU4SG5XZy1jUms/view seems to be an interesting strategy to reduce the cost of black swan hedging. But I wonder whether it still works under the current market conditions.
To cut down living expenses, I am considering relocating to Thailand or central Taiwan. Many Americans and Canadians choose to retire in Thailand. The warmer climate is an additional bonus. I am also looking into the business potential of farming Spirulina algae. If I can't sell it, I can still eat it.
 
tom said:
You might consider Option Pit as well, Mark and Andrew are quite good directing newer traders. If you do I can probably get you a discounted price, so just message me if interested. They have regular classes as well that are usually quite informative.
Click to expand...

They might have good classes but there response level is horrible even if you subscribe to the chat room..
Overall a mixed experience with them and some money lost.
 
The sad reality is that there is no one out here with all this education material and other bull Willing to absolutely put their money where their mouth is and take one through a mentoring of exactly how to manage and grow a small account they’re all selling concepts rewritten and we work with just a different name
 
Hi jrob,
Am I reading this correctly that you have not found the strategy you were looking for when you started this thread, roughly one year ago?
I just joined and was looking for similar answers and discovered this thread. Have you tried the Road Trip Trade that some people recommended here? ? I couldn't find it and have no clue what it is.
Many thanks to any member who can point me in the right direction.

Posted by Corto
 
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