This is great, thanks. When you say no more than 5% risked, does that mean you are risking to lose 5%, or allocating 5% of your capital on a trade? If it’s the former, you get 4 bad trades and you are down 20% of your capital. Probability theory says a string of bad trades WILL happen, 4 in a row is on the low end of bad strings.
Great question... I typically risk 3-5% of my capital on a trade. So, if I have 100K in the account I'll risk 3-5K on a single trade. While yes, 4 losers in a row would result in 12-20% downswing, I cannot tell you the last time we've had 4 losers in a row. March numbers so far are 52% hitting T1 (where majority of profits come off) 19% of trades hitting T2 (where we take the additional profits of 15-20%) and 8% have resulted in a runner being stopped. That leaves us with 23% of the trades ending up as a total loss.
The idea of "taking profit when it's due" is one that most intraday and swing traders have a problem with. Markets don't move in vertical lines. They take the most convoluted path to where it wants to go. While we don't specialize in "home runs." We do specialize in the idea of getting on base once we have a Grade A setup. These singles and doubles add up over the course of a month/quarter/year and allow us to maximize the capital at work.
The power of position sizing and targets has allowed us "eliminate" most of the risk upon T1 being hit.
For the purpose of example, let's say we buy 20 ES contracts at 5700. If my stop is 5690, and my target is 5715. If we hit 5715, I would be taking say.... 14 contracts off. Therefore we'd only be losing 6 contracts if we hit T1 and come back to a stop out. I'd still be making considerable profit. If we go T1 then T2, I'd be taking an additional 3 contracts at T2, moving my stop to breakeven as to guarantee the profit made is kept. That would leaving us with a small 10% runner.
The runner helps out with us getting upside if it happens, reduces FOMO etc. Thanks for your note!
I see You are using RSI, and RSI is relative to the index, but we are already trading the index, so how to wrap our head around what RSI does? Can you please explain a bit on that?
Also, I’m using TradingView, can you share the time frame and the RSI settings (if it’s not default) that you use?
This is great, thanks. When you say no more than 5% risked, does that mean you are risking to lose 5%, or allocating 5% of your capital on a trade? If it’s the former, you get 4 bad trades and you are down 20% of your capital. Probability theory says a string of bad trades WILL happen, 4 in a row is on the low end of bad strings.
Great question... I typically risk 3-5% of my capital on a trade. So, if I have 100K in the account I'll risk 3-5K on a single trade. While yes, 4 losers in a row would result in 12-20% downswing, I cannot tell you the last time we've had 4 losers in a row. March numbers so far are 52% hitting T1 (where majority of profits come off) 19% of trades hitting T2 (where we take the additional profits of 15-20%) and 8% have resulted in a runner being stopped. That leaves us with 23% of the trades ending up as a total loss.
The idea of "taking profit when it's due" is one that most intraday and swing traders have a problem with. Markets don't move in vertical lines. They take the most convoluted path to where it wants to go. While we don't specialize in "home runs." We do specialize in the idea of getting on base once we have a Grade A setup. These singles and doubles add up over the course of a month/quarter/year and allow us to maximize the capital at work.
The power of position sizing and targets has allowed us "eliminate" most of the risk upon T1 being hit.
For the purpose of example, let's say we buy 20 ES contracts at 5700. If my stop is 5690, and my target is 5715. If we hit 5715, I would be taking say.... 14 contracts off. Therefore we'd only be losing 6 contracts if we hit T1 and come back to a stop out. I'd still be making considerable profit. If we go T1 then T2, I'd be taking an additional 3 contracts at T2, moving my stop to breakeven as to guarantee the profit made is kept. That would leaving us with a small 10% runner.
The runner helps out with us getting upside if it happens, reduces FOMO etc. Thanks for your note!
I see You are using RSI, and RSI is relative to the index, but we are already trading the index, so how to wrap our head around what RSI does? Can you please explain a bit on that?
Also, I’m using TradingView, can you share the time frame and the RSI settings (if it’s not default) that you use?
Hello, I created a script for you/readers and sent you a substack DM. Could you check it please?