A few days ago, I came across a company called Traders International who provides courses on day-trading of the S&P500 “E-minis”. I logged on to one of their webseminar a couple of days ago as they were giving a live demo, using one of their techniques (double tops and double bottoms, together with proprietary stochastic and MACD technical indicator settings, whose values they did not divulge ) to pick very short term direction trades (most completed within 20 minutes).
The gist of it was as follows:
1) Every E-mini contract would cost $1000 each to establish.
2) Every point that the S&P500 moved was worth $50 per contract
3) You had the choice to enter both long and short positions
During the course of the demo, the instructor traded 5 contracts (each time) at market price when their indicators gave either a buy or sell signal. Immediately after confirming that the order had gone through, the instructor would issue 2 sell orders (a profit target and stop loss order). If the original trade was a long position and lets say it was entered at 2000, the profit target would be set to 2002 (2 points above initial trade) and the stop loss set to 1998 (2 points below initial trade), and vice versa if the initial trade was a short trade.
The amazing thing (to me, at least) was that out of 8 completed transactions, 7 were successful and had hit their profit target while the losing transaction was stopped out. With my very basic understanding of these things, the P/L on the profitable trades could be calculated as follows
Cost to initiate trade $5000 (5 contracts x 1000/contract)
Profit $500/trade (5 contracts x 2 points x $50/point per contract)
Similarly, the P/L for the loss making trade = -$500
As you can see, the 8 transactions would have yielded $3000 (6 net successful), from an initial investment of $5000, a return of 60% on one night.
Furthermore, the brokerage for trading from their recommended US broker could be as low as $2 to enter the trade and $2 to exit the trade, so over 8 completed trades would come to a paltry $32.
In essence, the methodology has been structured to give an equal potential gain and loss on each transaction and then to make money using their proprietary technical indicators to give the trader a better than even chance of getting it right. I guess if the probability of getting it right is >50% (even if it is only a little above 50%), then it pays to run as many transactions through the system as possible, especially considering the ridiculously low brokerage.
I have to say, based on what I have seen at least, that this is almost too good to be true. Perhaps I had misunderstood some of the things the instructor said (it was after all 4:00am in the morning ).
I am also baulking over their sizeable joining fee of approx U$5500.
Has anybody else had anything to do with Traders International, and if so, any feedback ??.
Also does anybody else trade these “E-minis” and are the returns (assuming the same 7/1 win ratio) anything like what I have described above (or am I still in Disney land !! after 2 days )