In this post:
- Review of the day’s trading performance
- Action Plan
Trading Day – April 17th, 2020
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No positions were opened today because ES was sideways for my entire trading period. I took today to lay the plan to add CL and GC back into my trading. The bulk of today’s post will be analysis and the action plan.
The challenge of sticking to one market is it can severely limit profitability as you wait for the proper setups. Adding two uncorrelated markets can provide more opportunity. This week is a great example of this. The S&P has been stuck in a range during my trading times while CL or GC were not.
If you have been following along, then you have read how I broke down the trading challenges I have had to devise a trading strategy. The bulk of this analysis was conducted on day 5. I completely revised my trading method on that day and my trading did a complete turn around.
To revisit some key points from from day 5, here is the table to guide our analysis:
|Symbol||Timeframe (minutes)||mATR (points)||Dollar Value||4 Contracts||3 Contracts||2 Contracts|
Recall that what I mean by "max ATR" (mATR) is the maximum value that ATR has regularly hit over the recent past. This is not scientific but I like to use this to account for the recent volatility in the market. To be even clearer…there is no official indicator called the mATR, it is simply a technique I use to conduct quick "back of the envelope" analysis. For more details on all of this, please re-read day 5. I used the table above to guide where targets were going to be set for CL and GC.
The trading plan that was developed last week was very effective at managing risk. The next challenge is what to do when ES is not trending. The simple solution is to trade another market, which is why I trade multiple markets. Using the table above, I created the risk management table for ES below:
|Points of Risk for ES||Stop Size||Contracts||Position Size|
The reason for the specific values in the "position size" column are to facilitate:
- Measuring the risk in the trade
- Determine the amount left in the daily loss limit
- Be able to trade more than once per day
- I am not risking more than 2% of the account in a single trade
This has worked really well and I want to use those same figures to create the CL and GC trade management tables. Got to keep it simple!
That means that my risk management table for CL is:
|Ticks of Risk for CL||Stop Size||Contracts||Position Size|
|100 (1 point)||$1,000||2||$2,000|
|125 (1.25 points)||$1,250||1||$1,250|
The risk management table for GC is:
|Points of Risk for GC||Stop Size||Contracts||Position Size|
The numbers are slightly different for GC. This is to keep it simple. If I matched the point values of GC to the scheme above, I would have fractions (i.e. half) of a point to calculate. Keeping the risk assessment simple is critical because I’m doing these mental calculations in the heat of battle.
I will trade the 5 minute chart for CL and GC, just like ES. Even though they are different markets, I’m going to use the same strategy – keep it simple.
A great characteristic of CL and GC is that when they decide to move, they do so with a sense of urgency. I’m excited to bring these markets back into my trading plan.
- Update trade plan whiteboard
- Modify the workspace in TSTrader to match this trade plan
- Sim trade this plan next week. Do not re-enter the trading combine until after successfully trading this strategy.