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Trade Management Method

Rather than seeking miracles from mechanical trading systems, I suggest seeking methods and setups that are proven to work most of the time, and learn to stop trading them when they are not working. There are methods and setups available that work from a medium to very high percentage of the time according to how much you try to extract from them. At Trading Educators, we believe in seeking small amounts from methods and setups that work a very high percentage of the time, using lots of shares or contracts so that the methods and setups have a high payout. However, that is in accordance with our trading style, and it may not fit your own.

In the past I showed a coffee trade that works over 90% of the time. When it happens, we load up on contracts and shoot for only 50-ticks. The method drops to only 80% effective if we shoot for 100-ticks.The more you desire to extract from a method, the lower the percentage of winning trades you will achieve. The result has been that we look for setups in which we are able to use a lot of contracts, aim for a very modest number of points, but enjoy a very high percentage of profitable trades. Rather than making a lot of trades, we trade a lot of contracts, or shares. Rather than seeing how many ticks, pips or points we can make from a trade, we see how many times we can win with only a small number of ticks, pips or points.

In all cases, we chart the equity derived from the trading method or setup so that we can see when it stops working. To accomplish this, we use a moving average of our equity. If equity drops below the moving average, we stop trading the method or setup. We then monitor the equity on paper, or a simulator until it moves above the moving average, at which point we begin trading it once again. Intervening to stop trading the method or setup when it is losing is discretionary; it allows us to use judgment, and even to adjust the method if we can see a better way to manage the trades.

The conclusion of the matter, in my opinion, is that in order to learn, grow, and be in control of your trading future, never surrender your brain and your will to any computer or program that will cause both your brain and your will to atrophy!


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Master Trader Joe Ross wants you to learn trading and he created products to do just that, teach you how to trade. Go to our website to find which ones best fit your trading style.


 

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Tuesday, 18 January 2022

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Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.