The Daily Market Forecast
Monday’s Best S&P Turning Points Results: The suggested short @ 4049.75 was a 32.75-point runner. What you didn’t know was the opposing volume level (unpublished here) was a buy @ 4106.00. That runner, selling the morning top, came 2.75-points from 4106.00 and ran all the way back to 4049.75. Enough of the time, volume levels work just fine! Read the P.S. and get involved!
Quick Tip: Calibrating Edge
Every trader and any worthwhile educator of traders talks about edge. It’s what the casinos have. You can win any given day, but they will win every day. Edge is advantage.
Edge is also mysterious to many traders. How do you find edge? Research is the best start but what are you looking for to validate it?
Here’s a simple formula to calibrate and validate the edge in any trading strategy.
1. Look at as many trade setups as you can find going back in time as far as you have time to do so.
2. From the entry price, measure the MOST price went AGAINST you on each setup. That’s called Maximum Adverse Excursion (MAE). Your stop loss would logically be the most MAE the strategy could have.
3. From entry price, measure the MOST price went FOR you on each setup. That’s called Maximum Favorable Excursion (MFE). You will rarely if ever get out of the trade precisely at the MFE. So why do you want to know it? Because…
4. … divide your average MFE by your average MAE. This needs to be a number well above “1”. The higher the better. Forget trying to finesse any rule set that doesn’t have a large ratio of MFE/MAE.
Tomorrow you’ll learn how to take this one step further.
The World Sentiment Index: (+100/-100) SOARS from -79 to +43 in a world of mixed bullish-leaning sentiment especially in the west (modest bullish bias, longs should outperform).
Catalysts: Home Price Index @ 9:00. Consumer Confidence & JOLTS @ 10:00. Quantitative tightening increases this week.
Today’s Best S&P Turning Points (in fast moving markets consider a wider stop and less size):
Sell 4104.50 stop 4110.25.
Buy 4038.00 stop 4032.25.
Trade Fearlessly,
Mike Siewruk
P.S. Multiple strategies, software tools, teammates, and coaching. Learn why you should join our team here. For a personal consultation to assess fit (without selling) email me for an appointment: mike@thedailymarketforecast.