The Factor Trading Plan – Simplified Version
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Tag Archive for: risk management
Changes in my trading since writing Diary of a Professional Commodity Trader
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Factor Update, June 22, 2018
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Losing a lot to win in the end
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It’s harder to manage a profitable trade than a losing trade
Profitable trades are the hardest trades to manage
Trades that are somewhere between break-even and an eventual price target are the hardest trades for me to manage.
I have no trouble exiting a trade that turns quickly into a loss or challenges my entry level a few days after I enter the trade.
I also have no trouble taking profits at the target level I predetermine for a trade.
It is between these two extremes that managing a trade is difficult. There is an old trading adage:
"Cut losses short, let profits run"
Easy to say -- hard to do, especially the "let profits run" part of the adage. In practice letting profits run is one of the most challenging parts of trading. On one hand I want to give a trade ample opportunity to trend toward a profit target. On the other hand I do not enjoy letting a profitable trade return to the starting gate ("Round trippers" is my name for these trades). Finding the balance is the issue.
Factor Alert, June 6, 2018 — It’s harder to manage a profitable trade than a losing trade
Profitable trades are the hardest trades to manage
Trades that are somewhere between break-even and an eventual price target are the hardest trades for me to manage.
I have no trouble exiting a trade that turns quickly into a loss or challenges my entry level a few days after I enter the trade.
I also have no trouble taking profits at the target level I predetermine for a trade.
It is between these two extremes that managing a trade is difficult. There is an old trading adage:
"Cut losses short, let profits run"
Easy to say -- hard to do, especially the "let profits run" part of the adage. In practice letting profits run is one of the most challenging parts of trading. On one hand I want to give a trade ample opportunity to trend toward a profit target. On the other hand I do not enjoy letting a profitable trade return to the starting gate ("Round trippers" is my name for these trades). Finding the balance is the issue.
The Factor Tracking Account presently holds two quite profitable trades in U.S. stock market indexes.
Long Sept Nasdaq futures at 7048 with a revised target of 7774. I have raised my stop to 7087, but this price is 154 points (or $3,800 per contract) below Tuesday's close. That is a lot to give back, but I do not see any closer level that makes sense on the chart. With 550-plus points remaining to the target I am willing to give the trade some room.
Long Jun Russell at 1628 with a conservative target of 1748. A further target of 1809 also exists. I will need to roll this trade to the Sep contract soon. My current stop at 1654.4 is based on the interpretation that the advance on Tuesday completed a small running wedge on the 6-hour graph.
Because I am long both the Russell and Nasdaq for the Factor Tracking Account (and my personal prop account) I will attempt to be more aggressive with the Russell and give the Nasdaq a bit more wiggle room. Given the extended target in the Nasdaq I would fully expect some corrections along the way, and perhaps even the development of a small flag or pennant. Should a flag or pennant develop I will have the ability to advance my protective stop in the Nasdaq accordingly.
I continue to point to the breadth of the U.S. equity market as a reason to believe the upper targets will be met. The cumulative A/D line for the NY Composite Index continues to charge into new ATH territory. Expanded breadth is a sign of a very healthy market.
I believe that the U.S. equity market is in the final blow-off stage of the bull trend that began at the 2008/2009 low. The climactic end to a major bull market can be explosive, so hang on folks for what could be a wild ride.
plb
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Trade Entry and Exit Tactics
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Factor Special Report — Trade Entry and Exit Tactics
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Three Most Important Ways to Measure Performance: Profit Factor, Gain-to-Pain Ratio, and Closed Trade NAV Curve
Human beings exist day-to-day in a world preoccupied by statistical measures, ranging from numerous personal health metrics, to standard weights & measures, to determinants of economic well-being, to statistical definitions of every area of our lives. Modern society could not exist without measuring nearly every conceivable thing. Yet, many traders make no attempt to convert their trading performance into meaningful metrics. This is unfortunate because meaningful metrics are not simply interesting statistics — rather they can serve important functions.
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Why do you cap your risk to 100bps per trade?
Risk Per Trade
A question from a past member only webinar. “Why do you cap your risk to about 100bps per trade?” I thought you might find this interesting.
Consider joining the Factor community where we run a monthly one hour member only Q&A session. All past webinars are archived on the site to be viewed at any time.
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Factor Membership
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Peter Brandt is a 40+ year veteran of trading. Through his Factor Service, members receive:
Trading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print bookWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentaryAlerts: Detailed information on specific charts as unique opportunities present themselvesMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodicallyWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questionsKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of contentAutomatic notifications: Email and social media notifications are sent out when new content is published.
View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work. Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about. For more information watch my 30 minute webinar where we cover the Factor service in depth.
I hope you will consider joining the Factor community.
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Peter Brandt’s Charting Tool
Peter’s Crypto Coverage
