Trade Aptitude
Results of Thursday’s Best S&P Futures Turning Points: Buying 4411.25 stopped out (maybe).
Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets, which saved yesterday’s buy):
Buy 4307.50 stop 4303.25. Short 4492.50 stop 4498.00.
The World Sentiment Index: (+100/-100) plummets to zero from +57 with Asia Bearish and the west mildly Bullish.
Catalysts: Revised UofM Consumer/Inflation Sentiment @ 10:00. Powell speaks @ 10:05. Jackson Hole updates.
Quick Tip: Adjusting Targets & Stops
Yesterday’s buy level stopped out with the suggested stop but given the speed (volatility) of the approach to entry you might have used a wider stop with less size. That turned a small loser into a decent winner (see chart).
As market conditions change so should your expectations. Your trade plan has entry and exit rules (for both loss and profit) but if those rules are static and not adaptive to the changing volatility you can do better.
One common indicator to use to measure volatility and adjust your stops and targets is Average True Range (ATR). Simply put, ATR is a measure of recent high-to-low movement on each interval (bar, candle, etc.). You can adjust the lookback period to be longer term, but Welles Wilder, the inventor, suggests 14 periods.
By adjusting your stops and targets considering the current ATR (give or take for market noise) you’re getting in harmony with the volatility. Since volatility changes it’s important to have an indicator that adjusts automatically during an open trade.
For example, in our intraday trend/momentum strategy we start with a 3x stop and move to 2x once a certain open profit target is met. From there on, the trailing stop will move closer when volatility lessens helping preserve more open profit once the trade nears completion.
Our team day-trades multiple strategies with edge in a live online environment using volatility adjusted stops and targets. 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