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Today’s Best S&P Futures Turning Points: Nothing tradeable today.
Monday’s results: This strategy is on hold.
The World Index: (+100/-100) remains at -43 with most major world markets Bearish.
Catalysts: 10-year bond auction @ 13:00. Otherwise, waiting on CPI/FOMC tomorrow.
Quick Tip: Stops
To survive and thrive in trading managing risk is critical. The basic component in your risk management plan is the stop loss (how much are you willing to lose on each trade).
There are many types of stop loss methods including:
1. Dollar
2. Maximum Adverse Excursion
3. Volatility
4. Moving Average
5. Time
6. Opposing signal
7. Percent Retracement
Like your choice in style of trading, your stop loss method needs to resonate with your personality. You must trust, even like it.
Given that markets change in volatility constantly the volatility stop is an excellent choice. One simple formula is using a multiple of the Average True Range. This method will tighten the stop when the market is calmer and widen the stop when the market is volatile. Adjusting your position size based on this stop allows you to manage your risk fairly for all market conditions.
Hint: If this method resonates with you, consider adjusting your profit targets based on volatility as well. It doesn’t make sense to expect a big move to a far away profit target when price is moving in a tight range, does it?
You can also combine stop methods. For example, as price is moving rapidly in your direction switching to a tighter stop, maybe a percentage retracement, could capture more of the gain when the move ends.
How do you know which to use? Research, testing, and experience.
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Trade Fearlessly,
Mike Siewruk
P.S. Feel free to pass this along to your trading buddies. Share in the wealth!
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