Trade Aptitude
Results of Tuesday’s Best S&P Futures Turning Points: Buying 5242.00 ended the plunge in price and offered a 9-point run before chopping sideways for the remainder of the day. The better trade was the breakout short from 4274.25 which ran 32.25 points to the turn.
Today’s Best S&P Futures Turning Points (consider wider stops and less size in fast moving markets):
Buy 5201.75 stop 5196.75. Short 5291.00 stop 5295.75.
The World Index: (+100/-100) reverses from +29 to -29 with most major world markets mildly Bearish.
Catalysts: ADP Employment Change @ 8:15. Fed’s Bostic @ 8:30, Bowman @ 9:45, Powell @ 12:10, Barr @ 13:10. Final Services PMI @ 9:45. ISM Services PMI @ 10:00. Crude Oil Inventories @ 10:30.
Quick Tip: Adjusting Targets
Your trading plan should have a basic set of entry and exit rules. Think of them as useful for “typical” market conditions. You can define typical by data mining your spreadsheet of results and finding the average moves for and against (called Maximum Favorable Excursion or MFE and Maximum Adverse Excursion or MAE).
The market is not always typical though. The volatility will vary by the hour, day, week, etc. Expecting your basic set of targets to perform in varying volatility isn’t ideal. You need to have rules for slower and faster markets.
Obviously you’ll be expecting smaller gains in narrow markets and larger gains in wide markets. Once again, you can define these conditions by data mining your results spreadsheet. Make sure you’re tracking data that allows for this exercise.
Here’s a few data points that our team has found useful; Average True Range (ATR), expected move in the options chain of the asset, and Globex session range (for futures). For chart indicators nothing beats Bollinger Bands, which display trend and volatility quite clearly. Every decent platform has them.
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Trade Fearlessly,
Mike Siewruk
P.S. Feel free to pass this along to your trading buddies. Share in the wealth!