Trade Aptitude
Friday’s Best S&P Turning Points Results: : The short @ 3731.25 ran for 18.25 points, after getting 51.75 from the prior day’s high-volume level.
Today’s Best S&P Turning Points (consider wider stops and less size in fast moving markets):
Short 3891.00 stop 3896.75. Buy 3702.00 stop 3696.25
Quick Tip: Optimal Stops
Limiting losses is critical for success in trading. Stop Loss orders are one important part of your risk management plan.
Where to place your Stop Loss is a personal matter. One common and sensible place is at the price your trade is proven wrong.
Here’s how to optimize your Stop Loss placement: 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.
Now 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 that has statistical relevance. This is edge. And the better news is that this number can change with volatility so you can monitor and adjust for current market conditions easily. In calmer markets the maximum risk will be less.
The World Sentiment Index: (+100/-100) SOARS from -64 to +21 in a world of very mixed sentiment. China/HK down hard, western world up. Historically it’s a coin toss on direction.
Catalysts: PMI Composite Flash (measures economic growth) @ 9:45 (this is an early look at the final number due later and is 85% of the survey). Chinese markets take a bath. UK feeling better about new PM. BIG earnings week.
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.