05 Feb “Negative” Reward-to-Risk is the Best?
“Negative” Reward-to-Risk is the Best?
Feb. 5, 2024
Subscribe to my YouTube Channel HERE.
You know what’s great?
A bunch of small wins.
Five minutes a day at the gym for a month. A walk around the block every evening. Two pushups in the morning when we get up.
The recent science is pretty clear: the secret to real success is not fourteen hours a day, seven days a week, “I’ll-sleep-when-I’m-dead.”
It’s a few hours a day for decades.
Small successes cure the lack of confidence.
Confidence leads to more successes.
And more successes lead to incredible results.
Even more, that process is repeatable.
Nobody gets burned out from having fun. And nobody ditches their trading system when they’re winning 80-90% of the time.
This isn’t to say that “good” reward-to-risk doesn’t work. Some people like winning 30% of the time in hopes of that big win.
It’s a hard life, though.
And it’s not a superior way to operate. It’s not the “right” way.
It’s just a choice.
We can win all the time and grow. Or we can lose all the time and grow.
Which do you like?
Here’s a variation of a system I’ve recently fallen in love with.
It’s the Buy Monday system, and we’re looking at the Nasdaq E-Mini (@NQ.D) during RTH (Regular Trading Hours).
The details are similar to what we talked about recently.
(Elite Members get the full details plus the code and I’m thinking of starting a Futures Strategy Subscription where I give away code for strategies once a month, or something along those lines. I’d love to have feedback on that.)
The Buy on Monday NQ.D System (10-Minute)
- Buy on Monday after 1 pm ET.
- Close out at the same time as entry on Thursday if we haven’t hit our target.
- Target is 20x less than the stop.
- Use ATR for a small target and a large stop so that we adjust to volatility over time.
A few notes.
- This produces a hypothetical 92% win rate since 2000 (see Report below).
- This strategy is producing outrageous hypothetical gains in recent years due to the uptick in tech popularity. With all the A.I. silliness, do you think interest in tech will get bigger or smaller? If it’s bigger, this strategy could do even better.
- It loses. But it loses in a small way. It loses potentially less than an index fund would.
And here’s the Curve using Portfolio Architect on a hypothetical $25k account trading 1 contract each time:
That handily beats the market over the same period:
And what’s more, it wins all the time.
The “negative” reward-to-risk doesn’t make us suffer through crippling losing periods.
The “negative” reward-to-risk pays us back constantly, both financially and psychologically.
In our next Newsletter, we’ll take a look at what happens if we use a dollar target instead of ATR.
Talk to you soon.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.