What I Am Learning From CME Competition

Trader's Mindset

Dec 10

I have entered the CME “Trade Against A Pro” paper trading competition. Of course, everyone would like to win, and most people are going to complain the competition is not realistic– and it’s not. However, there is a real value to the competition, and I recommend everyone to enter if you’re serious about trading futures– read on to find out why.

The real value is the ability to trade and familiarize yourself with more products. And, there is a value in placing many trades to learn more about yourself and your trading.

You see having more products to trade is I think a real key to trading professionally because trading one market can be limiting and incurs a lot of risks that may not be obvious to new traders.

I have conjectured that more stock traders are successful then futures traders. And, I think the reason for that is that most futures traders are more likely to focus on a single market like the ES. And a big part the reason is because the contracts are too big for small retail accounts and they don’t lend themselves toward experimentation. And, it is true that many traders have ventured into new products and lost money because they didn’t understand the product. So, one should learn more markets but do so in paper trading first.

However, I have believe one is more likely to be successful trading many markets— and this is coming from someone who used to consider myself an exclusive ES trader. Having shared that, I think there is a value in learning at least one or two markets really well– but its not enough today.

As for why it is the case– there are several reasons. Relative opportunity in markets ebb and flow. So, if one market isn’t offering great opportunity then another market may be. The other factor is it is hard to get a real handle on markets today to have an exclusive advantage.

What’s really powerful is imagine you just take the best 1 to 4 trades per day. If you trade a single market, you’re getting at most 4 trades before you start taking lower quality trades. However, with just 4 markets now you have up to 16 trades still only taking the best 4 trades per day.

Most trading accounts are lost due to either (1) taking too many serially correlated losses–several losses in a row or (2) taking a big loss.

If you take more then a single trade in the same market per day then you’re going to impacted by anything effecting that market. That means you only get 1 opportunity per day that is maximally non correlated per market.

The simplest way to get rid of correlated losses to (1) take higher quality trades, (2) trade more markets, (3) take fewer trades that are the “same” in a row (same side, same idea, same market), and (4) give each more risk (lower probability of stop out but larger loss).

What else? At least the past couple days, I am finding the best trades in Natty or Natural Gas (NG). This was a market I didn’t really consider in the past. I am also finding some appreciation for the Rusty or Russel 2000 (RTY).

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.