Thursday, June 5, 2008

Trades Oscillate before Friday's Big News!-- IFCN Wk 26 -Thu- Equity: $719.57

The trade on Thursday was obviously defensive preparing for Friday's Unemployment report.  This news is always watched every month to give a clue about overall economy strength, but this seems to be a particularly key news release because of the edgy feelings other currencies have been experiencing.

Today I sent out an example Sure-Breakout trade in the Eur/Usd to those on the subscriber list. It is only the second I have sent out since the IFCN site has begun.

Sure-Breakout is a mathematically-based (Gann-style) breakout trade which has setups in all freely traded markets and currency pairs. The setups usually occur at key areas in market position. Many times the breakouts are near the beginning of a major move.

It typically wins 70% of the trades to the profit target. Losses are always about 2/3rds the size of the profit target. If one breakout fails, like the first one taken today; meaning you get stopped out before hitting your profit target, I am always willing to take the reverse trade when it happens within 12 hours of the loss trade.
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This trade was the following:

Eur/Usd:
  • BUY 1.5484, stop 1.5441. Profit Target= 1.5549
  • SELL 1.5419, stop 1.5462. Profit Target= 1.5354

The sell got triggered first. After a rebound, the trade seemed like it was going to complete to its target, at one point ahead 54 points. Then it backed up quickly, got stopped out and the buy order got triggered, which quickly hit the profit target.

If one did take the trades, you likely got a total profit of 22 pips for the two trades.

The fact that this much action took place in the Eur/Usd today is the reason that the volatility of the IFC account has been so extreme in the last few days.

We're not done, I'm sure. The non-farm employment numbers are coming out early Friday and will likely toss the market around a bit. We'll see whether we will be beneficiaries or casualties.

Current equity: $719.57.

Recap tomorrow. We may even get some OneNightStand trades.

Joel Rensink
www.infiniteyield.com

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4 comments:

T. said...

Hi Joel,

I have calculated the Sure Breakout edge (expectation) in Multiple Rs. It is 0.75 or 75%!!! (math: 1.5R * 70% - 1R * 30%). In each trade, on average, you make 0.75R. In this post:

http://tinyurl.com/5oeuyq

you said that an edge of 8-9% is huge. Now, Sure Breakout has an edge of 75%. Is it THAT GOOD, or have I made an error in my calculations?

Regards,
T.

Anonymous said...

Hello from Italy,
I love your blog..I'm reading every post. Can you please tell me more about the Sure-Breakout?

Where can I read more about you and your trading style?

Best ragards

Joel said...

Keep following this site for any further information.

Joel

Joel said...

-T-

An 8-9% edge in a trend following method is truly large.

Occasionally a situation trade can have a much larger apparent edge than normal trend following methods. SureBreakout has been such a method for me. My personal trades with it over the years have been short of amazing.

I believe its relative obscurity has enabled a higher-than-average expectation.

I am quite certain the mathematical edge is approximately half your figure. (Still huge) And it isn't the fault of your calculations. There are complexities in figuring the edge of time-based methods that aren't readily apparent.

That being said; SB's theoretical edge is much larger than most methods. If it was 75%, I would already own the world, and I don't-- yet. :-)

Due to fills and actual trading conditions it is always better to round down generously. Sometimes I have had larger than expected losses trading it that should never have happened, but did. And, at some point, position size limitations are a potential problem.

Also, in my personal trading of SB, I easily may have missed many trades that could have been losers. Might I have been overly fortunate? Perhaps.

There is no perfect method. Risk of potential serious loss in excess of expectations is always a perpetual Sword of Damocles.

SB is great. I will continue to use it.