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Risk Per Trade

Why do you cap your risk to 100bps per trade?

Risk Per Trade

A question from a past member only webinar.  “Why do you cap your risk to about 100bps per trade?”    I thought you might find this interesting.

 

 

Consider joining the Factor community where we run a monthly one hour member only Q&A session.  All past webinars are archived on the site to be viewed at any time.

 

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Factor Membership

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Peter Brandt is a 40+ year veteran of trading.  Through his Factor Service, members receive:

checkTrading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
checkWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentary
checkAlerts: Detailed information on specific charts as unique opportunities present themselves
checkMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodically
checkWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questions
checkKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of content
checkAutomatic notifications: Email and social media notifications are sent out when new content is published

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View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.   Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.  For more information watch my 30 minute webinar where we cover the Factor service in depth.

I hope you will consider joining the Factor community.

Factor Trading - An Introduction

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Topix Nikkei Dow - Peter Brandt - Factor Trading

Topix (and Nikkei Dow)

Continuation patterns continue to develop in the Japanese stock market indexes. The Topix Index traded in Osaka (TSE) displays a 12-week continuation rectangle (Mar 2 was an out-of-line movement). While the measured target in Topix is 1633, a swing target of 1775 is possible. Read More
What would you tell your younger self - Peter Brandt - Factor Trading

What Would You Tell Your Younger Self?

 

This video except comes from our monthly Member only Q&A.  The question was:  Looking back over your trading career – What advice would you give to your younger self?   I thought you might find this interesting.

 

 

 

 

 

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Factor Membership

.
Peter Brandt is a 40+ year veteran of trading.  Through his Factor Service, members receive:

checkTrading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
checkWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentary
checkAlerts: Detailed information on specific charts as unique opportunities present themselves
checkMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodically
checkWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questions
checkKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of content
checkAutomatic notifications: Email and social media notifications are sent out when new content is published

.

View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.   Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.  For more information watch my 30 minute webinar where we cover the Factor service in depth.

I hope you will consider joining the Factor community.

Factor Trading - An Introduction

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Best Charts 2016 - Peter Brandt

Chart Summit – Best Dressed Charts of 2016

Each year at about this time I publish a “Best Charts List” showcasing the outstanding examples of classical charting principles from the just-completed year. The Best Dressed List (BDL) illustrates the types of trading situations Factor LLC seeks in its proprietary account. These types of trading situations are the main focus of Factor LLC’s trading. Read More
Gold Yen Ratio

Correlation of Japanese Yen with Gold

Gold Yen Correlation

Conventional wisdom has been abuzz lately about the Gold Yen Correlation. The two charts below are courtesy of my friend James Cutting of Nautilus Capital. Indeed, on the basis of a 63-day Gold Yen Correlation (I have no idea how James determines these time periods) there is presently a .85 correlation between the two markets. The second chart in this series shows that since 2013 there has been a fairly consistent correlation of at least .50 between the markets.   Yen Gold Correlation 2- Factor Trading - Peter Brandt Read More
Trading Expectations - The enemy of traders | Peter Brandt

Trading Expectations – The enemy of traders

Trading Expectations – The enemy of traders

My observation over the years is that a significant discrepancy between trading expectations and reality exists among newbies and aspiring traders. Unfortunately this gap between “wishful thinking” and “what-is thinking” can be the downfall of an aspiring trader. What are some of the false trading expectations held by many newbies and aspiring traders?

  • Win rates of 60%, 70% and even 80% can be achieved on a continuous basis – this is especially true if a trader expects to achieve a positive win value/loss value ratio
  • The win rate over a large number of trades will apply fairly evenly to any subset of smaller number of trades
  • A risk of 5% to 10% of capital per trade is reasonable and will produce the maximum profit
  • A trader can know with a high degree of confidence what a given market will do
  • Annual RORs of 50%, even 100%, are achievable if only certain trading systems or gurus are followed
  • A trading account can reasonably be funded from savings, a loan, an inheritance
  • Day trading is the way to go for most beginning traders
  • The secret to trading success comes from trade identification or trade signaling

So, what do I view to be the realities of trading?

  • Successful market speculation is one of the most challenging endeavors one can undertake
  • It generally requires three years for a beginning trader to gain a sense for how she or he will trade and five years to become proficient with the adopted approach
  • A win rate of 50% is fabulous for a position trader
  • Even with a win rate of >50%, drawdowns in excess of 30% of capital will occur annually if the bet size exceeds 2% of
  • Trading outcomes over a series of trades are subject to random probability – and random probability can be a real bitch
  • A trader really has no clue what a given market will do
  • While day trading can be a profitable approach, a beginning trader needs to understand the reasons why the odds are stacked against day trading. Hint: the reason deals with the need for a trader to have an “edge.” The reality is that HFT and quant operations have the edge on a daily basis – so a day trader must compete with firms that know spec orders in advance in order to be profitable. I am NOT saying that ALL spec day traders are doomed. I am simply stating that the odds of success in day trading are far less than for position
  • A trader’s worst drawdown is the one yet occur
  • If there is a “secret” to trading, it has VERY little to do with trade identification and It has more to do with overcoming the human pitfalls of fear, greed and false hope.

 

It would be nice to think that every trade … week … month … year will be profitable. But that is not reality – at least not for me. Statistically I can define my average year (although in reality no two years are ever alike). With 25 years of trading basically the same way I have the luxury of knowing my trading benchmarks and metrics inside and out. These trading benchmarks and metrics help me to form trading expectations. For example, I can reasonably expect four months of an “average” year will be quite good each containing two trades closed at a 350-basis point or more profit. I can also reasonably expect four months to be slightly profitable each containing at least one profit closed at a 200-basis point profit. Then I can expect four months of treading water when good trades are hard to come by and my challenge is holding onto capital.

January has become a water-treading month. Does this mean I traded poorly (or at least sub-par) during the month? Absolutely not! I am completely satisfied with the orders I entered in January – REMEMBER, TRADING CAN BE REDUCED TO THE PROCESS OF ORDER ENTRY. Does this mean I need to “tweak” some aspect of my trade identification, trade entry, sizing or trade management? Absolutely not! My job as a trader is to continue following my overall strategy and tactics through good times and not so good times. The results of the last trade, the last series of trade, the last week or the last month are not determinants of long-term trading success for me.

 

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Factor Membership

.
Peter Brandt is a 40+ year veteran of trading.  Through his Factor Service, members receive:

checkTrading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
checkWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentary
checkAlerts: Detailed information on specific charts as unique opportunities present themselves
checkMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodically
checkWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questions
checkKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of content
checkAutomatic notifications: Email and social media notifications are sent out when new content is published

.

View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.   Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.  For more information watch my 30 minute webinar where we cover the Factor service in depth.

I hope you will consider joining the Factor community.

Factor Trading - An Introduction

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Copper COT

Can Copper Defy the Odds

Copper

The daily and weekly charts of Copper appear to be forming an 11-week rectangle or ascending triangle, depending on how the boundary lines are drawn. A move and close above 274.40 would complete this consolidation pattern and establish an upside profit target of 300.

 

copper-3-peter-brandt-png copper-2-peter-brandt-png

 

I am willing to buy the breakout in Copper, but with a huge caveat. The market is coming off a period of all-time record spec long and commercial short positions (by a massive margin compared to the previous records). Normally I would shy away from buying a market with this COT profile. Yet, as I have pointed out elsewhere in this Update, there have been rare occasions when a market is resolved in the direction of a record spec long COT profile. In fact, the most outstanding example of capitulation by commercial interests occurred in Copper in Oct 2003 – the period with the previous spec long and commercial short record holdings (see red vertical line on the monthly chart, next page). In that case the market went straight up for 2½ years with prices quadrupling. Usually commercial interests are right – but when they are wrong, they are dead wrong.

 

copper-4-peter-brandt

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Factor Membership

.
Peter Brandt is a 40+ year veteran of trading.  Through his Factor Service, members receive:

checkTrading Commodity Futures with Classical Chart Patterns: A free PDF copy of Peter’s classic out-of-print book
checkWeekend Update: 10-16 pages full of in-depth chart analysis and charting commentary
checkAlerts: Detailed information on specific charts as unique opportunities present themselves
checkMarket Commentaries: Communications on specific topics regarding market speculation and trading distributed periodically
checkWebinars: Monthly member-only webinars where Peter speaks about current conditions and fields member questions
checkKnowledge Center: Fast and easy access to current and archived content from Peter’s extensive library of content
checkAutomatic notifications: Email and social media notifications are sent out when new content is published

.

View your Factor Member options here. You could consider your membership in the Factor Service as just one more trade. If the Factor Service is not of value to you, well, it is just one more trade that did not work.   Through the Factor Service I endeavor to alert novice and aspiring traders to the many pitfalls you will face – and to offer advice on overcoming those pitfalls. My goal is to shoot straight on what trading is all about.  For more information watch my 30 minute webinar where we cover the Factor service in depth.

I hope you will consider joining the Factor community.

Factor Trading - An Introduction

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Silver - Peter Brandt - Factor

Silver Potential

Silver

An asset showing potential.  Silver is a market with a tendency to form H&S patterns with stunted or abbreviated right shoulders. This is currently the case on the daily chart. I would greatly prefer to see a decline below 16.40 followed by an advance and close above 17.50. Such a scenario would entice me to be long Silver. Read More

Jack Schwager – Peter Brandt Interview – Part 3 (Final)

Jack Schwager - Peter Brandt Interview - Part 3

  Part Three, 45 minutes - Personal worst trading mistake, getting out of a trade, four pillars of the Factor Service, favorite and least favorite patterns, trading plan now vs. just starting out, worst mistakes traders make.  Final interview of the series recorded in December has been published. . https://youtu.be/5JM0uBGnxIE Read More

Jack Schwager – Peter Brandt Interview – Part 2

Jack Schwager - Peter Brandt Interview - Part 2

  Part 2 of the three part interview series recorded in December has been published.  Part 3 will be released the week of Jan 16th. Read More