Trade Aptitude
Results of Wednesday’s Best S&P Futures Turning Points: Neither trade level triggered.
Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets):
Buy 4767.25 stop 4761.50. Short 4797.50 stop 4800.75.
The World Index: (+100/-100) soars from -86 to +50 with most major world markets solidly Bullish.
Catalysts: Jobless Claims, Philly Fed MFG Index, Building Permits, and Housing Starts @ 8:30. Crude Oil Inventories @ 11:00. Fed’s Bostic @ 11:30. World Economic Forum in Davos (all week).
Quick Tip: Think Risk First
You might be thinking, "Aren't we trading for the profits?" Yes, however, in the long term a well-structured risk management plan should outweigh the short-term profits you stand to gain.
Why? Trading is a marathon, not a sprint. Your goal is not just to gain high returns in the short run, but to sustain profitable trading over a long period.
Think of it this way. If you’re an engineer and lose your job, you can easily find another one. If you’re a trader and you lose your trading account, you’re out of business.
Find your “risk number,” the amount you can afford to lose both financially and psychologically. Adjust it based on your account size (as it grows or diminishes). This will help you weather the inevitable losing streaks and drawdowns.
One key element of risk management is the risk-reward ratio relative to your winning percentage. A trading strategy that wins 40% of the time may not sound great but if the risk-reward ratio averages 3:1, you’re golden.
Once you have your risk management on “automatic” you can start thinking about the next most important skill, open trade management. Learning the art of exiting profitable trades will bring your performance to the next level.
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Trade Fearlessly,
Mike Siewruk
P.S. Forward this blog to your trading buddies. Share in the wealth!