The Daily Market Forecast
Tuesday’s Best S&P Turning Points Results: The suggested buy @ 4038.00 was only good for a quick 6-point bounce.
Quick Tip: Target Optimization
Yesterday you learned about the ratio between the Maximum Favorable Excursion (MFE) and Maximum Adverse Excursion (MAE). The higher the ratio the better.
Yesterday’s suggested buy only offered 6.25 points before reversing. If your target was greater than that, you stopped out. Here’s how knowing the historical MFE for every individual trade your strategy set up, not just the average MFE (for the ratio mentioned above), will be very helpful.
Let’s say you have collected MFE on hundreds of trades. You didn’t need to take the trades, they just needed to fit your strategy rule set. Sort the data by MFE, high to low. Now you can ask, “What percentage of the time does price go how far?”
Now you can assign targets to scale out of your winning trades at high-probability levels. Of course, this presumes you’re trading multiple contracts/shares, as you should be. Having one exit is never optimal.
In our case, that 6.25-point bounce was a winner after taking a target and moving the stop to breakeven. Doesn’t sound like much but far better than stopping out. Focus on losing less and less often. The big wins will come when price moves far, Losses are controllable.
The World Sentiment Index: (+100/-100) DUMPS from +43 to -29 in a world of mixed bearish-leaning sentiment (historically price closes higher 56% of the time, but the lower closes are 25% bigger losers).
Catalysts: ADP Employment Report @ 8:15. Chicago PMI @ 9:45. EIA Petroleum Status Report @ 10:30 (best day of the week to catch intraday trends in oil).
Today’s Best S&P Turning Points (in fast moving markets consider a wider stop and less size):
Sell 4051.50 stop 4156.00.
Buy 3929.00 stop 3923.25.
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.