Trade Aptitude

Today’s Best S&P Futures Turning Points: Buy 5322.75 stop 5319.25. Short 5320.00 stop 5334.50 if price drops below and retraces to entry. 

Friday’s results: Neither trade triggered. 

The World Index: (+100/-100) rises from -57 to -21 with all major world markets mildly Bearish or neutral on low volatility. 

Catalysts: Home Price Index @ 9:00. Fed’s Kashkari @ 9:55. Consumer Confidence @ 10:00. Dallas Fed MFG Index @ 10:30. Fed’s Cook & Daly @ 13:05. 

Quick Tip: Finding Edge

Simply put, Edge is probable advantage. It’s what the casinos have. The gambler can win any given day, but the casino will win every day. 

Edge can be 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.

There are many trading platforms available that allow you to program your rules and find these answers (and more) quickly. I’ve noticed the cost of programming has come down so if you’re not a coder, you can hire out the work for a reasonable investment. It’s worth it. 

Tired of trading alone? 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! Take advantage of the final days of this promotional price.   

Trade Fearlessly,

Mike Siewruk

P.S.  Feel free to pass this along to your trading buddies. Share in the wealth!