|
This April Gabriel Grammatidis Introduces His NEW Futures Course
|
|
|
|
|
|
Tharp's Thoughts
Inbox Mentoring
|
|
|
|
|
|
|
|
-
Feature: Designing My Trading System:
Part 3: Trading Metrics Beliefs,
by G
-
Workshops: NEW Future's Trading Course in April, Cary NC
-
Tips: Goldilocks Markets Like a “Just Right” Employment Announcement,
by D. R. Barton, Jr.
-
|
|
Gain Valuable Insight With Advanced Techniques to Enhance the Success of Your Swing Trades
|
|
Ken Long returns to the Van Tharp Institute this April with his popular Advanced Adaptive Swing Trading workshop. Students of this workshop rave about the enormous, and invaluable amount of information and personal support they receive from this instructor. If you're a swing trader, you won't want to miss this opportunity to learn the systems Ken teaches in this class.
Scroll down for a quick video example on adjusting your intraday positions for Swing Trading.
|
|
|
|
Designing My Trading System:
Part 3: Trading Metrics Beliefs
by G
|
|
|
|
|
Editor’s Note: G (who requested anonymity) is a client with an engineering background
who has been working on developing trading systems for the last several years. He
details his observations and insights from that process in this five-part series of articles.
All trading metrics need a job. The specific jobs assigned to a particular metric stems from one or more of the following four purposes:
- Measuring Financial Gains and Losses
- Enabling Process Control
- Enabling Process Improvement
- Enabling Process Comparison
The first purpose is simple: how do your trading results compare to your trading business plan? The other three purposes are process-oriented and eventually determine your financial results.
Examples of process metrics are expectancy and SQN score. With only these two metrics, you have the beginning of a trading metric system that produces confidence in both the near-term and the long-term which builds the foundation for process control, process improvement, and process comparison.
Process control of a trading system isn’t complicated. For your selected time frame, document the market type, win-rate, average winner, average loser, expectancy, and SQN. Process control is all about knowing which factors matter the most in your trading system and paying attention to how changes in those factors affect financial results. Create only enough variables to represent the factors that really matter. Those variables should provide normal ranges of variation to allow exceptional values to standout. The effects of any process experiments on your system should be caught by at least one of your few chosen variables.
The final process purpose for trading metrics is being able to compare one system to another, using clearly defined and widely accepted criteria as the basis for comparison. Van’s metric of SQN was primarily developed to help traders answer a basic question on the degree to which position sizing strategies can be used by traders in reaching their financial objectives. The secondary use of SQN for comparing different systems is a Van Tharp Institute (VTI) application of the metric.
In an effort to compare my trading system performance to non-VTI systems (those that don’t measure expectancy or SQN scores), the metric “Profit Factor” (PF) turned up as the most common system performance metric used by trading system designers for comparing various systems.
PF is really simple: divide the gains from all your winning trades by the losses from all your losing trades for a given period of time. The resulting number usually ranges between 1 and 4, where 1 is ‘breakeven’ and 4 is considered very high and difficult to sustain.
Beyond comparing the performances of various systems, PF can be used for both process control and for process improvement.
The formula for PF can be re-written into a very useful alternate form as:
PF = (winner% / loser%) x (average R winner / average R loser)
With a 67% win-rate and a Reward-to-Risk Ratio (RRR) of 2, you have:
PF = (.67/.33) x 2 = ~ 4
These two ratio-metric factors, i.e. the ratio of win-rate to lose-rate, and the RRR, have very different ranges of possible values, ranges I found enlightening in thinking about process improvement possibilities.
The literature and on-line sources mention professional systems running win-rates as low as 30% and still making good profits. Likewise, some scalpers brag about running 90% winning trades. Given these stats, what’s the dynamic range for win-rates?
One the low end: (0.3/0.7) = 0.43, while on the high end: (0.9/0.1) = 9.0
Hence, the dynamic range for win-rates is: 9/0.43 = ~ 20
RRR ranges are tougher to determine. On the low end, excluding the Ultra-High-Frequency traders, the lowest I’ve heard for very-high-win-rate scalping is 0.2R, so we have (0.2R/1.0R) = 0.2 On the high end, I have measured daily RRR’s running above 20R using advanced position-sizing strategies.
Hence, the dynamic range for RRR is: 20/0.2 = 100
The difference in RRR and win-rate dynamic ranges is: 100/20 = 5x
So, if you wanted to dramatically improve your PF, there is 5 times more dynamic range available to you in working on increasing RRR’s than in trying to increase win-rates. Hence, this alternate form of the PF metric suggests where to allocate attention if the goal is to make major improvements in PF, and also provides an easy way to measure those improvements once implemented.
If you doubt the logic and math above, consider the three notable quotes from successful traders make the same point a different way.
“It’s not whether you are right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
George Soros
“It turns out that it is much easier to make money when you are wrong most of the time.”
Curtis Faith, author, Way of the Turtle
“Looking back, about one-third of our trades have been winners and about two-thirds losers. That’s been true for a long time.”
William Eckhardt, co-organizer of the Turtles experiment
If you’re still not buying the math or the quotes above, don’t worry … your skepticism shows you are human. Evolution has wired us to be intrinsically risk averse, perhaps an inherited artifact from our ancestors who had to survive the scarcity and uncertainty of food and water for untold millennia. Even worse, our successes in school and in sports ingrain the premiums placed by our modern world on scoring highly on tests and winning at everything we do. Rational thought and the logic of math doesn’t stand a chance when pitted against our drive to fulfill our emotional needs to “be right” and to win. Let’s face it: winning feels good, and RRR is an abstract concept … there’s simply no contest! Most traders can’t lose on most of their
trades and still feel good about trading … our wiring and upbringing rule us.
My final take on trading metrics: what matters the most in a trading is not a system’s statistics but the system’s fit to the trader. “Useful” metrics derive from a good fit between trader and system … it’s just that simple.
In the upcoming article, Part 4 will describe several psychological lessons I learned that materially improved my trading and my life.
– G
|
|
|
|
Gain Insight On Adjusting Positions in Our
Advanced Adaptive Swing Trading Workshop
See example video below.
|
|
In this 7 minute video Ken shows an example of live portfolio management intraday for swing positions. He goes thru about 50 positions in 8 minutes, monitoring and adjusting positions during the lunch hour. This is one of the many insights you will gain through his Advanced Adaptive Swing Trading class.
|
|
|
|
Goldilocks Markets Like a “Just Right”
Employment Announcement
by D. R. Barton, Jr.
|
|
|
|
|
We go through cycles on what economic reports traders and investors see as important. I’ve talked to traders who remember the 1970s when money supply was the big deal.
Leading up to the Great Recession, housing numbers were a big deal. New home starts, housing permits, existing home sales, etc. got scrutinized and surprises or irregularities moved the markets.
From mid-2014 to early 2016, the Baker Hughes rig count was a huge deal. The Crude oil price crash was affecting equities markets and since weekly Friday rig count impacted oil prices, equities traders kept a close eye on the announcement. CNBC, Fox Business Network and Bloomberg would break into regular programming to announce the number.
Today, a number that is “front of mind” is the monthly employment report — the family of U.S. government employment reports that includes Nonfarm Payrolls (number of nonfarm jobs added or lost), Unemployment Rate, Labor Participation Rate (how many people are actively employed or looking for employment) and the recently important Average Hourly Earnings (how much hourly wages are moving up or down, month-over-month).
The reason that these are so important is that they impact both items in what The Fed calls its “dual mandate”: maximizing employment and stabilizing prices (read: managing inflation).
That last number in our list of employment numbers, Average Hourly Earnings, is a big “X Factor” in ongoing inflation discussions.
So this past Friday the market spiked higher after this employment came out. The combined porridge of numbers turned out to be much to Goldilocks’ liking. Here’s why…
Forget about being too hot or too cold, things look just right for a reason.
Sure — it would be easy to say that the February jobs number from the US Labor Department are arguing that the economy is too hot and is set for the Federal Reserve to turn off the heat. After all, 313,000 new jobs estimated by the survey is a monster number.
And the number gets even hotter with the trailing two-month revision for January and December upped by 54,000.
And then there's the unemployment rate calculation that has the US unemployment rate at 4.1%, a 17-year low.
This would typically see bears roaring that the economy is way too hot and that it's all going to end poorly for the markets.
But let's let those bears stay in hibernation. Because as we dig further into the bowl of numbers, we find that there’s a lot to like.
A Perfect "Porridge" Leads to a Monster Up Day
First, the Labor Force Participation Rate is up to 63% for the first time in 11 months and only the fourth time since December of 2012. This means more folks coming into the market for jobs, which is good for further production and further consumer spending.
And because of the participation and other factors — wage growth is moderating from the prior month's 2.9% as February's wage inflation was reported to be only 2.6% and the prior month's 2.9 number was revised down to just 2.8%
That means that we have more jobs and more folks in the workforce and that they aren't driving prices, and hence inflation, up.
This is further evidenced by the Fed's Personal Consumption Expenditure (PCE) index for the same month that was released just days ago. The PCE is a more accurate inflation measuring tool than CPI because it measures the entire expenditure spending for around 67% of the domestic US economy, whereby the CPI is a calculated index of a selection of items.
The Fed and the Open Market Committee (FOMC) uses the PCE when analyzing inflation, and the number for the core PCE is sitting at 1.5% — which is well below the FOMC target of sub 2%.
Moreover, inflation is moderate not just in the US — but globally. The Organization for Economic Cooperation and Development (OECD) just released its inflation information showing that the average rate for the top 35 economies is only running at 1.8% down from the prior month's 1.9%. So, most of the globe's leading monetary authorities have little to no need to tighten — which is exactly the sort of discussion that was held last week by the European Central Bank (ECB) which is keeping its gas burning with its bond buying program.
The FOMC meets next on March 20th-21st and while there might be some policy movement — there isn't any compelling need to take dramatic action. This provides some soothing balm for our "Fed fear" narrative.
Add in a buoyant economy in the US, the EU, and other leading markets — and the market has relatively many fundamental reasons why stocks should keep things nice and warm for our returns going forward...
Markets have had a couple of down days since then, (they were overdue after 7 straight up days in the Nasdaq), but most intermediate term quantitative readings are on the bullish side.
Your thoughts and comments are always welcome — please send them to drbarton “at” vantharp.com
Great Trading,
D. R.
|
|
|
|
|
|
About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured analyst on Fox Business Networks’ Varney & Co. TV show (catch him Tuesdays at 9:30 a.m. EST), on Bloomberg Radio Taking Stock and MarketWatch's Money Life Show. He is also a regular guest analyst on CNBC World, CNBC's Closing Bell, Fox Business Network’s Cavuto Coast to Coast and Making Money with Charles Payne and the China Global Television Network. His articles have appeared on SmartMoney.com, MarketWatch.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at
"vantharp.com."
|
|
|
|
|
|
|
|
|
|
|
April 14-15
Saturday-Sunday
|
|
|
|
|
|
|
|
Participating in the Oneness Awakening Course is an extraordinary opportunity to benefit from some of the important journeys Dr. Tharp has taken to transform his life.
The course has become a fundamental tool in Dr. Tharp's mission to help his clients succeed. Don't miss a chance to learn more about how you can become more aware, positive, calm, centered, and successful. Plus, this is one of the few courses in which you can apply for Super Trader Program after completion.
Following this weekend training, traders can expect to naturally become more aware, positive, calm, and centered. By extension, they will also experience a shift in how they perceive the market. When a trader sees the market as it really is, rather than what they want to see, the act of trading becomes more relaxed and they become more confident and successful. Does this sound like the type of experience you want trading to be?
While this two-day course is not a technical course about trading, we have seen amazing results in the traders who experience the benefits of being more 'awake' and aware, calmer and more centered. Why? Because the person themselves are always the primary instrument, even before the technical skills of trading are engaged. Just like the athlete with impressive skills, traders can also utilize the phenomenon of tapping into their awareness to achieve premium results. Keen awareness, in turn, opens up new possibilities. Another great thing about the concepts and experiences in this course is that they have benefits that apply throughout students' lives, not just in their trading endeavors. Time and time
again, traders tell us that their trading improved after taking this course, but also their personal lives as well! Plus, at $495 this event is a bargain!
|
|
|
Attend the NEW Futures Trading Systems with 3 all new systems,
plus several advanced swing systems in Ken Long's
Adaptive Swing Systems workshop!
|
|
|
|
Presented by Gabriel Grammatidis
|
|
|
|
April 21-23
Saturday-Monday
Brief description available now. More info coming soon.
|
|
|
|
|
|
|
|
Presented by Gabriel Grammatidis
|
|
|
|
April 24-25
Tuesday- Wednesday
Registration open now. More info coming soon.
|
|
|
|
|
|
|
|
Do you remember the big swings up and down lasting over several months in metals and energies (such as precious metals and oil)? Why don’t you trade moves like these in your preferred timeframe at a time during the day that fits you? I have a strong belief that in these trending markets following the trend is key. Why? The stronger the trend the more counter-trend traders are attracted into the “Market Traps” that are set-up by the specific patterns of my three systems.
Getting stuck in any of the traps can be a very painful experience – benefiting from it is a lot more fun. Do not miss the big number of opportunities presenting themselves to you now and in the years to come. Take your trading to the next level! Join us for this three-day workshop and leave prepared to trade the system right away.
Plus, we will offer Two days of live Futures trading so you can trade the systems live!
|
|
|
|
April 27-29
Friday-Sunday
|
|
|
|
|
|
|
Check out Ken's 4-minute video referenced in our feature article today where he touches upon a variety of trading edges to consider.
In this new three-day workshop, Dr. Ken Long presents a series of advanced, adaptive trading systems that work well in the swing period holding timeframe — from two days to two weeks.
In addition to the robust seven patterns found in the RL Framework, Ken will also teach at least three other swing trading systems:
MaxPain Range Compression System
In any given two-week period, some stocks and ETFs will be down. If you compare all of the issues that are down, some of them are down more than others. These are the issues with “max pain”. Of that max pain group, some of them are very near their 10 day lows — they have not yet started to recover. These are the ones who have range compression. MPRC symbols have a higher probability of popping than other groups and Ken has effective and simple ways to take advantage of these situations.
Autoframer System
For this system, Ken starts with the assumption that every symbol has a reward to risk relationship with its 10 day high and 10 day low. The potential long reward is the distance from its current price to its 10 day high and the risk is the distance from its current price to its 10 day low. Ken will stalk very closely those symbols with the greatest reward to risk ratio within those parameters. That idea is so simple that you might not think this system would work well but if you thought that, you would miss out on nearly daily opportunities.
Daily Squeeze Play System
While prices do not move reliably in a cyclical pattern, volatility tends to move much more cyclically. Periods of low volatility are typically followed by periods of high volatility. With an effective way to find symbols that have had low volatility recently, Ken has developed an effective system that captures those volatile moves out of the narrow price ranges.
|
|
|
|
Presented by Van Tharp
with co-presenter RJ Hixson
|
|
|
|
|
|
|
|
|
Presented by Van Tharp
and RJ Hixson
|
|
|
|
May 22-24
Tuesday-Thursday
|
|
|
|
|
|
|
|
|
|
CryptoCurrency Trading
Only available to those enrolled in our Super Trader Program.
Presented by Van Tharp
|
|
|
|
June 19-21
Tuesday-Thursday
|
|
|
|
|
|
|
|
Options Trading
Presented by Chuck Whitman
|
|
|
|
June 23-25
Saturday-Monday
|
|
|
|
|
|
|
|
Options Trading Advanced
Presented by Chuck Whitman
|
|
|
|
June 27-28
Wednesday-Thursday
|
|
|
|
|
|
|
|
|
|
Presented by Van Tharp
with co-presenter RJ Hixson
|
|
|
|
|
|
|
|
|
|
|
July 17-19
Tuesday-Thursday
|
|
|
|
|
|
|
|
|
|
Presented by Kim Andersson
Profit When Price Goes Nowhere: How to Successfully Trade Sideways Markets In Every Time Frame
|
|
|
|
August 17-19
Friday-Sunday
|
|
|
|
|
|
|
|
|
|
Presented by R. J. Hixson
|
|
|
|
September 14-16
Friday-Sunday
|
|
|
|
|
|
|
|
Presented by Libby Adams and RJ HIxson
|
|
|
|
September 18-21
Tuesday-Friday
|
|
|
|
|
|
|
|
|
|
Presented by Van Tharp
with co-presenter RJ Hixson
|
|
|
|
October 12-14
Friday-Sunday
|
|
|
|
|
|
|
|
|
|
October 16-18
Tuesday-Thursday
|
|
|
|
|
|
|
|
Presented by Gabriel Grammatidis
|
|
|
|
October 20-22
Saturday-Monday
|
|
|
|
|
|
|
|
Presented by Gabriel Grammatidis
|
|
|
|
October 23-24
Tuesday-Wednesday
|
|
|
|
|
|
|
|
Presented by Van Tharp
and RJ Hixson
|
|
|
|
October 26-28
Friday-Sunday
|
|
|
|
|
|
|
|
|
|
|
|
November 9-11
Friday-Sunday
|
|
|
|
|
|
|
|
|
|
November 12-13
Monday-Tuesday
|
|
|
|
|
|
|
|
Exciting New Work from Van Tharp
|
|
|
|
November
15-17
Thursday-Saturday
|
|
|
|
|
|
|
|
|
|
FREE Book!
We pay for the book, you just pay for shipping.
When you add the free book to an item already being shipped there is generally no extra shipping charge (of course, depending on your location).
Read Van’s Latest Book —
TRADING BEYOND THE MATRIX
The Red Pill for Traders and Investors
Eleven traders tell their stories about transforming
their trading results and lives, in this 400 plus page book.
Below is a brief video on how powerful this book is to traders.
|
|
|
|
Cary, NC Workshop Information
For a list of nearby hotels for our Cary, North Carolina locations,
click here.
Book your flight arriving to the Raleigh-Durham International Airport (RDU).
When traveling to a three-day course, it's best to arrive the evening before.
To help determine your arrival and departure times, see:
Questions? Click Here to Ask Van...
CONTACT US
This is a supplement to our subscription based newsletter, Tharp's Thoughts.
800-385-4486 * 919-466-0043 * Fax 919-466-0408
|
|
|
|
|
