Trade Aptitude

Results of Monday’s Best S&P Futures Turning Points: Neither suggested level triggered in a choppy narrow range session. 

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

Buy 4405.00 stop 4400.25. Short 4492.50 stop 4498.00. 

The World Sentiment Index: (+100/-100) eases up from +50 to +64 with all major world markets Bullish except the S&P futures (flat). 

Catalysts: Home Price Index @ 9:00. Consumer Confidence & JOLTS @ 10:00. With the Fed focused on data for interest rate decisions it’s likely that reactions to economic releases will be heightened. 

Quick Tip: What is a Big Risk?

A big risk is not in the trade itself. It’s in the losing streak. 

Billionaire hedge fund founder Bruce Kovner said “Novice traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.” 

The key is to not apply the percentage to the price of the asset but apply it to your risk capital. Simple math. If your risk capital is $10,000, you should risk no more than $100 to $200 on each trade. 

Your next decision is where your stop loss will be. If the stock you’re buying is $10/share and your stop loss is $1 away that would be 10% of the stock price. This is where size enters the equation. To adhere to the 2% of risk capital rule, you should buy just 200 shares. 

Here’s the reason why this works: At 2% risk you would have to endure 14 losing trades in a row to draw your account down to $7,500 (25% overall loss). At 5% risk you only needed 6 losing trades in a row. At 10%, 2.5 losing trades in a row. 

Everyone trades to make money. But properly applying modest risk and position sizing is the more important decision. If you’re focusing on how much you could make and not how much you could lose in a losing streak, you’ll likely fail and certainly get emotional. 

Our team day-trades multiple strategies, each with its own optimized risk management plan.  Join our team, learn the strategies, and trade live with us daily for 30 days. Money back if you’re not blown away!

Trade Fearlessly,

Mike Siewruk