How to manage risk and place stops like a professional in the emini futures markets

In this post, I want to discuss the most important fundamental of trading, risk management. It's critical to manage risk like a professional, not an amateur. An amateur gives his losing trades "more time to work out", postponing taking the loss, having the loss turn into a big negative hit in their account. A professional realizes that losses are a part of the business and have their risk management strategy well defined and implement it time after time. We have the following risk management strategy:

- Prior to entering a position, know where your stop will be.

a) At the invalidation point

b) No more than 8 ticks for the /NQ, $40 max loss per trade

#1 Rule: ONLY MOVE STOPS ONE WAY, IN THE DIRECTION OF YOUR TRADE

- Once in a position, know what you will do with your stop and when you will do it.

a) After a 3 tick move in your favor, your invalidation point on the 4 range should have increased as well, allowing you to move your stop to the new invalidation point. Normally, we adjust our risk from 2 points to 1 point, once we have a move of 3 ticks in our favor.

b) Once have a move in our favor of over 4 ticks, we like to adjust out stop to 1 tick above entry, ensuring a riskless trade / $5 profit worst case scenario.

Our goal is to have a 1 point move in our favor on every position so that we can eliminate risk on all positions. What we've noticed is that full stops are taken when we take a bad entry signal, being impatient and trading in a ranging market. Therefore, in the next post I will discuss taking good entry signals and attempting to recognize and disregard poor entry signals. We feel there are 2 markets conditions, 1) Moving market, recognizable direction (Participate fully) 2) Ranging market, unrecognizable direction filled with many signals both short and long (Should avoid and not participate in the markets at this time).

I will also explain invalidation points in the next post.

Let me know if you have any questions about this post.

HT

How to manage risk and place stops like a professional in the emini futures markets

In this post, I want to discuss the most important fundamental of trading, risk management. It's critical to manage risk like a professional, not an amateur. An amateur gives his losing trades "more time to work out", postponing taking the loss, having the loss turn into a big negative hit in their account. A professional realizes that losses are a part of the business and have their risk management strategy well defined and implement it time after time. We have the following risk management strategy:

- Prior to entering a position, know where your stop will be.

a) At the invalidation point

b) No more than 8 ticks for the /NQ, $40 max loss per trade

#1 Rule: ONLY MOVE STOPS ONE WAY, IN THE DIRECTION OF YOUR TRADE

- Once in a position, know what you will do with your stop and when you will do it.

a) After a 3 tick move in your favor, your invalidation point on the 4 range should have increased as well, allowing you to move your stop to the new invalidation point. Normally, we adjust our risk from 2 points to 1 point, once we have a move of 3 ticks in our favor.

b) Once have a move in our favor of over 4 ticks, we like to adjust out stop to 1 tick above entry, ensuring a riskless trade / $5 profit worst case scenario.

Our goal is to have a 1 point move in our favor on every position so that we can eliminate risk on all positions. What we've noticed is that full stops are taken when we take a bad entry signal, being impatient and trading in a ranging market. Therefore, in the next post I will discuss taking good entry signals and attempting to recognize and disregard poor entry signals. We feel there are 2 markets conditions, 1) Moving market, recognizable direction (Participate fully) 2) Ranging market, unrecognizable direction filled with many signals both short and long (Should avoid and not participate in the markets at this time).

I will also explain invalidation points in the next post.

Let me know if you have any questions about this post.

HT

5/11/11 Trade results: 5 trades, $155 Profit

Here is the chart from today. As I said earlier, I will be posting information about our trading strategy. The main aspects that we emphasized today was:

- Take trades in the current direction of the market.

- Patiently wait for the entry signal / momentum to build up.

- If in a position, and the trade is invalidated, exit immediately, don't wait for your full stop to get hit at 2 point. The 2 point stop is more of a safety precaution. If conditions change, and you recognize this, manage the trade properly and exit- profit, loss, B/E: doesn't matter.

- Recognize when to participate in the market (when its moving) and when to not participate (when its ranging / signals and direction are unclear)

5 trades, $155 profit today.

5/11/11 Trade results: 5 trades, $155 Profit

Here is the chart from today. As I said earlier, I will be posting information about our trading strategy. The main aspects that we emphasized today was:

- Take trades in the current direction of the market.

- Patiently wait for the entry signal / momentum to build up.

- If in a position, and the trade is invalidated, exit immediately, don't wait for your full stop to get hit at 2 point. The 2 point stop is more of a safety precaution. If conditions change, and you recognize this, manage the trade properly and exit- profit, loss, B/E: doesn't matter.

- Recognize when to participate in the market (when its moving) and when to not participate (when its ranging / signals and direction are unclear)

5 trades, $155 profit today.

5/10/11 Trade Results, new concepts: 2 trades, $110 proft

We're working on improving the entry signals, attempting to eliminate the lower quality signals, and making the stop management more aggressive.

We had 2 trades, $110 profit today sim, entering with the trend / stop runs.

Here is the chart with the entries and exits.

5/10/11 Trade Results, new concepts: 2 trades, $110 proft

We're working on improving the entry signals, attempting to eliminate the lower quality signals, and making the stop management more aggressive.

We had 2 trades, $110 profit today sim, entering with the trend / stop runs.

Here is the chart with the entries and exits.

Trading this week

Hey guys!

Just returned from Seattle. I will be posting system rules, signals, theories, etc this week. I have decided to SIM trade a few new concepts this week, but may incorporate a few live trades as well; so I will post the results of those if I decide to take any live trades.

The following week should be all live trading, utilizing the system rules, entries, exits, etc that will be discussed this week.

Happy trading!

HT

Trading this week

Hey guys!

Just returned from Seattle. I will be posting system rules, signals, theories, etc this week. I have decided to SIM trade a few new concepts this week, but may incorporate a few live trades as well; so I will post the results of those if I decide to take any live trades.

The following week should be all live trading, utilizing the system rules, entries, exits, etc that will be discussed this week.

Happy trading!

HT

4/25/11: Afternoon session trade results: 2 trades, $70 profit for day

We took one trade during the afternoon session. The stop on this trade was 3 ticks as shown by the swing low on this chart. The target was only at 1 point because of the trade being near the close of the day.

We ended the day with 2 trades, a profit of $70.

4/25/11: Afternoon session trade results: 2 trades, $70 profit for day

We took one trade during the afternoon session. The stop on this trade was 3 ticks as shown by the swing low on this chart. The target was only at 1 point because of the trade being near the close of the day.

We ended the day with 2 trades, a profit of $70.