Edition 798 - October 18, 2019
by Professional Trader Andy Jordan
Educator for Spreads, Options, Swing, Day Trading, and
Editor of Traders Notebook Complete
Traders Notebook: How to Read a P&L Chart
Today I want to have a look at the P&L chart of all spread trade recommendation in Traders Notebook since January 2019 and I would like to discuss a few things a trader should always check to see if a trading method or a specific way of trading make sense to him or her. As we can see on the (hypothetical) P&L chart from below, the profit reached almost $15k But what does “$15k” mean? What was the risk? What about the draw-downs? Were there enough trades to see the results are statistically significant?
Let’s go through it, step-by-step:
A result of about $15k is kind of meaningless, as long as we don’t know how much money we need so we can get to this result. This is usually the point, where a good marketing specialist will look up how much margin was used to cover the trades and then he will probably tell you the following: “You could have reached that result with an account size of about $15k, Andy. As you can see, this means a return of about 100%! Isn’t that awesome?” But wait a minute. After the trades are done, it is always easy to calculate the optimized values to present huge profits. But what would have happened if there were more losing trades in a row? Well, easy answer: You would have been out of business! So, let’s have a look at the chart by ourselves and forget about the marketing guy. As we can see, the largest draw-down happened around trade 31 of about $5k. Is there a way we can have a few of these draw-downs in a row? Yes, of course. To be on the save side, we better look at the largest draw-down and we multiply this value a couple of times so we can resist even larger draw-down periods. How often we multiply the draw-down is of course up to each trader, but I would use at least 3 to 4 times the largest draw-down ($15k - $20k). Therefore, an account size of about $30k to $40k or even better $50k make much more sense to reach these results. And if we use for example an account size of $50k for our calculation, our profit is down to about 30%, which is by the way still pretty good in the world of “real trading” and not “marketing trading”.
Of course, you can take the trades also with a smaller account, let’s say with only $25k, but then you should also reduce your profit expectation, just to be not too disappointed after one year of trading. Especially beginning traders get disappointed when they make “only” 20% or 30% a year because they have statements like “I made 1 million out of $10,000 in just one year” in mind. But I can tell you, using good risk and money management parameters, these statements are all bogus.
If you still think the results shown on the chart above are pretty good and you would like to join me with Traders Notebook, I want to make you a special offer today.
Pay for a 6-month subscription and get a 12-month subscription from us! That's right, 12-month subscription for only the 6-month subscription price!
Click here to purchase Traders Notebook 6-month subscription.
I think that’s a pretty good deal, isn’t it?
Wishing you all the best with your trading,
Andy Jordan
Editor for Traders Notebook which shows you Futures Trading Strategies in Spreads, Options, and Swing Trades. Learn step-by-step how to trade successfully.
Traders Notebook Complete
Learn how to manage this trade by getting daily detailed trading instructions, click here!
© by Andy Jordan. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.
by Master Trader Joe Ross
Author, Trader, Trading Mentor, and Founder of Trading Educators, Inc.
Developer of Instant Income Guaranteed
Chart Scan with Commentary: ATR
Mr. Joe! I heard that you have an eBook about stop placement. Would you be willing to tell us at least one of the techniques you have in the book?
No, I cannot do that, it wouldn’t be fair to those who have purchased the eBook. However, since you asked for something, I am wilfing to offer you a strategy that uses one of the tools from the eBook—that tool is Average True Range (ATR).
For purposes of this article I will use Wilder’s ATR, which is pretty standard in most software. There is a lot of information as to how ATR is calculated available for free on the Internet, so I’m not going to go into that.
Typically, ATR is created with a 14 bar moving average of volatility. My use for ATR in this particular strategy is to use a 10 bar moving average of volatility—or more simply a 10 bar setting for Wilder’s ATR.
The strategy can be used in any time frame within which you want to make a short-term trade. This means anywhere from a few minutes to a few days, or even a few weeks.
Most of the explanation for the strategy can be seen on the chart below:
Step1: Calculate the Stop Loss—Stop loss = Entry price minus 2 times the ATR
Step 2: Calculate the Profit Target—Profit Target plus 4 times the ATR
It’s all there on the chart. The following chart shows the result. Make sure you take the ATR reading from the day prior to entry.
Notice the drop in ATR at the time of the profit taking exit. Obviously, volatility has dropped and now reads 0.9857.
The Stop Placement that Makes Sense - Joe Ross wrote "Stopped Out" in order to show you four specialized ways for stop placement. Every single one of them is based on reality. Your stops will rarely be where everyone else puts theirs. Your stops will be unique to you, based on your personal risk tolerance, in conjunction with the risk in the market. Learn more!
© by Joe Ross. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.
by Master Trader Joe Ross
Author, Trader, Trading Mentor, and Founder of Trading Educators, Inc.
Developer of Instant Income Guaranteed
Trading Article: Making a Comeback
Have you ever had a bad day when nothing seemed to go right? First, you got up late. Second, your computer wouldn't boot up, and third, when it did, you couldn't seem to get in and out at the right time when executing even the most basic trade. What really upset...read more.
© by Joe Ross. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.
by Philippe Guartier: Administration and
New Developments of Instant Income Guaranteed
PERFORMANCE RECORD
SEPTEMBER 2019 TO MAY 2014
INSTANT INCOME GUARANTEED
Need more information? We want to hear from you.
Email questions to This email address is being protected from spambots. You need JavaScript enabled to view it.
30% Savings using coupon code: iig30
30% Savings using coupon code: iig30
Trading Idea: Instant Income Guaranteed
SFIX Trade
On 6th October 2019 we gave our Instant Income Guaranteed subscribers the following trade on Stitch Fix Inc. (SFIX). Price insurance could be sold as follows:
- On 7th October 2019, we sold to open SFIX Nov 15 2019 14P @ 0.15, with 39 days until expiration and our short strike about 29% below price action, making the trade very safe.
- On 11th October 2019, we bought to close SFIX Nov 15 2019 14P @ 0.05, after only 4 days in the trade.
Profit: 10$ per option
Margin: 280$
Return on Margin annualized: 325.89%
Philippe
30% Savings using coupon code: iig30
Receive daily trade recommendations - we do the research for you.
♦ SIGN UP TODAY! WEALTH BUILDING FOR YOUR FUTURE ♦
Learn More!
Instant Income Guaranteed
30% Savings using coupon code: iig30
© by Joe Ross and Philippe Gautier. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.
BECOME A PART OF OUR TRADING TEAM
JOIN TODAY
INSTANT INCOME GUARANTEED
by Professional Trader Marco Mayer
Educator for Forex, Futures and Systematic Trader
Creator of Ambush Trading Method, Ambush Signals, and Head of AlgoStrats.com
Trading Article: Manual Backtesting Pitfalls
If you don’t want to learn how to backtest automatically right now but still want to profit from backtesting, you got to do it manually. That’s how I started too many years ago. I still remember sitting there with printed charts and writing down trade results on a separate sheet of paper.
Now there are some pitfalls you better...read more.
Marco Mayer is an Educator for Forex, Futures and a Systematic Trader, so if you have questions, he wants to hear from you! This email address is being protected from spambots. You need JavaScript enabled to view it.
Check out Ambush Signals
LEARN ABOUT AMBUSH TRADING METHOD
© by Marco Mayer. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc.
WE APPRECIATE YOUR TRUST IN US
THANK YOU FOR YOUR BUSINESS!
Check out our Blog!
To view previous published Chart Scan newsletters, please log in or click on "Join Us,"
shown above, to subscribe to our free "Members Only" section.
A WEALTH OF INFORMATION & EDUCATION:
Joe Ross-Trading Educators' popular free Chart Scan Newsletter has been published since 2004.
Note: Unless otherwise noted, all charts used in Chart Scan commentary were created
by using Genesis Financial Technologies' Trade Navigator (with permission).
Legal Notice and Copyright 2019 Disclaimer - Published by Trading Educators, Inc.
Chart Scan is a complimentary educational newsletter.
