Trade Aptitude

Today’s Best S&P Futures Turning Points: Nothing tradeable today.  

Friday’s results: This strategy is on hold... but is improving and likely out of the drawdown soon.

The World Index: (+100/-100) plummets from +36 to -36 with most major world markets Bearish. The U.S. deviates with a strong bullish Globex session so far. 

Catalysts: Empire State MFG Index @ 8:30. Fed’s Powell @ 12:00, Daly @ 4:35. Goldman Sachs gapping up on earnings. Trump presidency looks more likely. 

Quick Tip: Excursions

I’ve been asked a few times… “Why do you document the trade results with the maximum that price moved, since you can’t exit there anyway?”

Two data points you should keep for every trade, taken in real time or not, are Maximum Favorable Excursion (MFE, how far price went in your favor) and Maximum Adverse Excursion (MAE, how far price went against you). 

As your data set grows you’ll have hard evidence to explore different exit strategies. This review process often uncovers edges in your trades so you can improve results. 

MAE is important. The most it can be is where you set your stop. It’s how much it moves against before stopping out that may offer some edge. For example, let’s say your stop is 5 points from entry and your data shows that 90% of the time it only moves against 4 points or less. A simple analysis of the winners that required more than 4 points MAE will show whether the extra risk is worth it. 

MFE is used similarly. Analyzing what happens when price goes in your favor certain distances can offer some optimal targets. For example, in our trend strategy we've found quick targets of 4 and 7.5 points during a move are optimal.  Assuming you’re trading multiple contracts these “risk management profit targets” quickly take risk off the table and allow you to open manage the remainder of the position comfortably. 

Data analysis starts with documentation. You will learn plenty by reviewing and documenting every trade, taken or not. Get started!

If you’re trading stocks and/or options, you should watch this training session I recorded recently. I demonstrated these two leading indicators of stock price movement that are unique enough to get you a solid edge. Get instant access here: Stock/Options swing traders.

Trade Fearlessly,

Mike Siewruk

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