To adapt the calculator for our needs, instead of estimating win rate and and standard deviation per hour, we will make those daily estimates. So the win rate would represent average profit per day, and the standard deviation would represent a measure of the variability of daily returns.
Let’s say that your account total (bankroll) is $100,000. You are willing to risk 2% of your money in a single day, and 2/3 of your days will fall between losing and making 1% on your capital. You have a modest positive edge that will earn you 10% on your money in a year, which would be $40 per day on average ($40 x 250 trading days = $10,000).
Your risk of ruin in that situation--the risk of losing all your capital--is only .03%….
The lesson to be learned is that risk of ruin jumps astronomically when one’s edge is eroded and when one’s variability of returns expand. This is why it’s imperative for serious traders to cut their risk (reduce the variability of returns) when they sense that they’ve lost their feel for markets. It’s also why it’s imperative for serious traders to risk manage their day to day trading, so that they cap their daily P/L swings relative to the edge they possess.
And the frustrated trader who overtrades when he loses his edge? Risk of ruin, the calculator tells us, jumps to 100%.
The main development in the foreign change market over the past week has been the short squeeze of the yen, and to a lesser extent, the Swiss franc.
The move coincided with a backing up in JGB yields, with the 10-year approaching the 1.0% threshold, a nearly three-fold increase since the BOJ announced its more aggressive monetary stance in early April. The Nikkei took it on the chin, falling 12.5% between Thursday's high near 16k and Friday's low just below 14k.
Many of the foreign investors who have poured almost $80 bln into Japanese equities this year have hedged the currency risk, by selling the yen. However, given the slide in Japanese share prices, the may be over-hedged. To ...
Here's the latest weekend update from Serge Perreault, a Chartered Professional Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.
The S&P 500 bounced off its uptrend resistance and paused its ascension, on average volume and on falling momentum.
A break of this week's low (1636) would confirm a correction in the direction of the EMA10 (1603).
Via google translate from Corriere Della Sera, Beppe Grillo is in favor of a "Referendum on the Euro Within a year" "Europe needs to be rethought. We consider just one year of information and then hold a referendum to say yes or no to the euro and yes or no to Europe. " Beppe Grillo to ride a strong theme of the last election campaign the 5 Star Movement. "Europe on the euro and the British teach us democracy. No party can claim the right to decide for 60 million people. "
"I want to go to Europe and re-discuss a Plan B to be in five years, "added the leader M5S, explaining:" When we ...
ANF - Abercrombie & Fitch Co. – Shares in teen retailer, Abercrombie & Fitch Co., are getting hammered today, down 10% at $48.92 in early-afternoon trading after the company reported a wider-than-expected first-quarter loss and missed topline estimates, lowered its full year earnings forecast and said same-store sales would be down slightly for the rest of the year. A review of pre-earnings report activity in Abercrombie options yesterday indicates one trader was prepared for the pullback today. It looks like the strategist initiate...
While the S&P 500 has had quite a year already the Nikkei has been the story of the globe as they are performing acts of central banking that even put the U.S. Fed to shame. And Japan's central bank can buy ETFs and REITs directly per their charter versus the U.S. bank. Combined with a yen in free fall it's been a heck of a move for the Nikkei since last November. I noted last week we were seeing extremely rare weekly and monthly type overbought readings on bo...
The market went through some gyrations on Wednesday in reaction to Fed Chairman Bernanke’s testimony before the Joint Economic Committee. He first defended continued quant easing by warning, “A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.” Stocks dutifully rallied and all major indexes hit new intraday highs.
But alas, consensus is apparently not a given over the longer term. The minutes hinted that a tapering off could start sooner, “A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.” So …...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Reminder: Craigzooka is available to chat with Members regarding his virtual portfolio performance, comments are found below each post.
I am going to share with you how I manage my IRA and the power of reducing your cost basis. My goal each year is a 20% return in my IRA. Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis. To illustrate the power of reducing your cost basis here are some trades we did last year. These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.
We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...
Stock market posts another record setting week, but the big news came after Friday’s close.
Courtesy of NASA
The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.
For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi. Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward. So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...
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