This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
I traded 9 times today–3 wins and 6 losses. Two of those losses were a full -1R and dumb plays where I chased a rally. I just throw money away. Luckily for me, I had a trade pay off big in CFC early today, and I finished up about +1% on the day (from a high water mark of +3.5%). I entered once for a loss and then the second trade paid off in spades. The chart of the CFC trade follows:
I went short premarket at 19.56 with a stop at 19.75, above the premarket high. After the open, we made it as high as 19.71, where I covered to avoid slippage on my stop. This happened to be just about the top tick. After more weakness, I went short again at 19.47, and got the break I was hoping for. I covered half at consolidation after the breakdown, and then covered the rest when we broke back above 18.80 where I had set a stop to protect profits. My stop was 0.10 from entry, so I pulled out +6.2R on this trade. My $ size was only 0.5% of my equity, so it only returned 3% though. Not all R’s are created equal.
This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com
August 29th, 2007 at 4:31 pm
nice
August 29th, 2007 at 10:36 pm
It sounds as if you have a style that fits your comfort level. Perhaps risking less per trade will enable you to trade the chart and not the money. Food for thought.
August 29th, 2007 at 10:40 pm
play big, my man.
or else you will grow old cynical and bitching about it all.
remember if you were not trading, you would be working ..so your trading must yield at least $/hr that u may earn sashaying around in a ritzy office w/ a hot secretary….
August 29th, 2007 at 10:47 pm
No, when he risks less he doesn’t feel the addict’s rush. :-)
August 30th, 2007 at 10:26 am
I apologize in advance for this novice question but what do you mean by “-1R” or “+6.2R” when you refer to wins and losses?
August 30th, 2007 at 12:33 pm
David: “R” stands for amount risked on the trade. Say my stop was $0.10 below my entry, and I eventually made $0.60 per share on the trade. Then the “R” value of the trade is Trade profit / Risk = 0.6/0.1 = 6R. Trader Mike has the best articles out there on position sizing, expectancy and risk multiples, which all form the foundation of proper money management.
August 30th, 2007 at 1:43 pm
Prospectus: I see…so “R” is some form of “actual risk/reward ratio”, by actual I mean that it is calculated once you exit the trade (and are able to calculate profit). The way I had previously seen the risk/reward ratio used was as a risk management technique for trade entries, i.e. target/risk. I will take a look at Trader Mike’s articles. Thanks for the reference.
August 30th, 2007 at 1:45 pm
David: Yes. Say you make $1.00 per share on a trade, and so do I on another stock trading at the same price. If you risked $3.00 to make that dollar, and I risked $0.50, our risk-adjusted returns are much different.