Edition 801 - November 8, 2019
I would like to thank all the traders who found the value in our 800th Edition Newsletter special offers. Many new and returning traders reached out, sharing their trading stories which allowed me to keep encouraging each and every one of them. I want you to succeed as a trader and that is why I share my trading knowledge with you today. Now, let me share with you my next trading lesson, please read on. Happy trading, Master Trader - Joe Ross
Master Trader Joe Ross
Author, Trader, Trading Mentor, and Founder of Trading Educators, Inc.
Developer of Instant Income Guaranteed
Chart Scan with Commentary: Color Bias
In the past few years, I admit to liking to see my charts with colored bars: Red for a down bar and green for an up bar. However, when I really want to study a chart and do some chart reading, I switch to black bars on a white background. I want to avoid color bias.
I have many things against using candlestick charts, which I won’t go into here, but one of them is the fact that candles give color bias, even when they are black and white.
I want to make a fine point with regards to color. When you see a green bar or candle, your mind automatically thinks “up.” When you see a red bar or candle, your mind automatically thinks “down” (unless you happen to be in China, where red and green have the opposite meanings).
The graphic below will serve to show what I mean.
Prices had been coming down to the lowest low on the chart, which is correctly colored red…or is it? If you look closely at the bar you will see that momentum had actually changed. Prices opened near the close of the previous bar, and moved up the high. But at some time during the formation of that bar, momentum changed, and from the low of the bar up to the close, prices recovered, and actually closed close to where the bar opened.
This recovery by prices should have served as an alert that the next bar might very well be an up bar, which is actually what took place. In other words, the upward momentum from a supposedly down bar was continued on the very next bar. The color of the bar that made the low placed a mental bias in favor of further downward movement, whereas the relationship of the close to the low signaled a change to upward momentum.
© 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.
Master Trader Joe Ross
Author, Trader, Trading Mentor, and Founder of Trading Educators, Inc.
Developer of Instant Income Guaranteed
Trading Article: False Consensus Part 2
Jim own a Hog farm. He produces 1,000 hogs per month to take to market, so he runs a fair-sized hog operation. Jim grows corn and soybeans for feed. He grinds his own beans into meal, and has silos for storage of both the corn and the beans.
In years where the crop of the best quality, Jim stores...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.
Philippe Guartier: Administration and
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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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Professional Trader Andy Jordan
Educator for Spreads, Options, Swing, Day Trading, and
Editor of Traders Notebook Complete
Trading Article: Golden Rules by Paul Tudor Jones
During the next few weeks, I want to have a look into the “golden rules” of famous traders with the idea, to find something they all have in common.
I am starting with Paul Tudor Jones. Here, what I found in Wikipedia about him:
Paul Tudor Jones II (born September 28, 1954) is an American investor, hedge fund manager, and philanthropist. In 1980, he founded....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.
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© 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.
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Learn how to manage this trade by getting daily detailed trading instructions, click here!
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.
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
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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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