Trade Aptitude

Results of Thursday’s Best S&P Futures Turning Points: Buying 4396.50 bounced 11.25 points favorable.

Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets): 

Buy 4339.25 stop 4334.00. Short 4498.00 stop 4502.25.

The World Index: (+100/-100) jumps from -79 to +21 in a world of mixed sentiment. 

Catalysts: PMI Flash MFG/Services @ 9:45. Treasuries yield kisses 16-year high.

Quick Tip: Optimizing Stops

Limiting losses is critical for success in trading. Stop Loss orders are one important part of your risk management plan.

Where you place your Stop Loss will define your position size. The first step in optimizing your stop is to vary it with market volatility. That will obviously vary your position size. 

The second step is to log the MAE (Maximum Adverse Excursion) for every trade setup, whether you took the trade or not. MAE is simply how far against your entry it went before stopping out or hitting your first profit target. 

Obviously, the maximum MAE you’ll have is the stop itself. But on all those winning and breakeven trades there is a number it went against but didn’t reach the stop. This is important data. Keep it updated for every trade from now on. 

With this data you can determine what percentage of the time your trades stop out but more importantly how often they move against your entry and how far. 

Here’s an example. In one strategy we trade the data shows that 93% of all trades don’t go beyond 5.75 points MAE. More importantly the 7% of trades that did were net losers as a group. Good to know.  

Now you have a maximum risk you can assign to all trades with statistical relevance. This is edge. 

Tired of trading alone and guessing what to do next? Join our team. You can learn the strategies and trade live with us daily for 30 days. Money back if you’re not blown away! Click here for details. 

Trade Fearlessly,

Mike Siewruk

P.S. Feel free to share this newsletter with your trading buddies.