Edition 799 - October 25, 2019
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Traders Notebook Complete
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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
Let's look at the P&L chart of all spread trade recommendations in Traders Notebook since January 2019. 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 makes sense. As we can see on the (hypothetical) P&L chart from below, the profit reached almost $15k:
- 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.
© 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: Chart Analysis?
Hi Joe! I’ve attached a graphic showing how I view charts. I figured if all of my indicators are in agreement, then it’s probably okay to trade, especially if there is general agreement with the candlesticks. Please take a look at my chart. Am I on the right track?
What you are doing is a common mistake made by many beginning traders, so, I’m assuming that you are a beginner. If you are not, then you got off to a bad start in trading at some time in the past.
All of the indicators you are using can be employed as momentum indicators. In essence, they are all measuring the same thing—momentum. Within reason, they should all be showing the same thing, they should be in agreement. The only indicator that is not a pure momentum indicator, is CCI, which is really a volatility indicator. But by setting it at 14 bars, you have bastardized it so that it matches the momentum indicators.
Since you are used to looking at candlesticks, I’m not going to comment much about those, other than to say, for the most part studying them is a waste of time. However, virtually all Forex traders seem to use them, with or without having studied all the intricacies of candlestick lore.
All you really need is one of those momentum indicators. And what you want it to do is to confirm what you see in the prices. In other words, you should be trading based on the price action, not on an indicator. Indicators are always late. Use logic! All an indicator can reveal is what has already happened.
Personally, I prefer Stochastics, and I like that you set them at 5,3,3. That makes for a sensitive indicator, which will closely follow the price action. However, I know that many traders prefer MACD. But if you look closely, MACD is the one indicator you have that has been so smoothed, that it is hardly following the price action at all. MACD is useful for longer term trading, but at your current settings, it is not very useful for scalping or short-term trading.
I will make one suggestion: Set CCI at 30 bars, which will make it be truly a volatility indicator. Then if you want to use it along with any other momentum indicator, you will have true confirmation of what is taking place with prices.
© 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: Ready for Action
In 1981, when I first started day trading, I would get to bed early night, wake up early, and be excited about starting the trading day. I remember on time when it was a cool, sunny day, and I really felt rejuvenated. After a quick...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
Trading Idea: Instant Income Guaranteed
BBY Trade
- On 2nd October 2019, we sold to open BBY Nov 15 2019 57.5P @ 0.65, with 45 days until expiration and our short strike about 16% below price action.
- On 15th October 2019, we bought to close BBY Nov 15 2019 57.5P @ 0.20, after 13 days in the trade.
Philippe
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© 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.
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by Professional Trader Andy Jordan
Educator for Spreads, Options, Swing, Day Trading, and
Editor of Traders Notebook Complete
Trading Article: Repetitive Mistakes
Anyone is allowed to make one mistake. When the same mistake is repeated a second time, caution should be noted. The third repetition of the same mistake constitutes....read more.
Andy Jordan is the 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!
6-Months FREE when you purchase a 6-Month Subscription!
© 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 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.
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© 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.
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