Risk Reward Ratio for Day Trading Futures Strategy

– Risk/Reward Ratio

o How much risk per trade? (stop loss)
o Compared to how much reward on each trade (profit targets)
o Low risk/reward ratio is one of the most aspects for a new trader.
o New traders are expected to make mistakes

o Low R/R/R will allow you to make those mistake without costing you too much of the money you make on winning trades.

o I want the lowest RRR possible so I make more when I win and less when I lose.
o Fast Track Method uses a 1:1 RRR

 10 tick stop
 10 tick target
 20 ticks stop
 20 tick target

o Day Trading Method uses a 1.5/1 RRR

 6 tick stop
 4/8/Runner
 5/10/Runner
 Loss = -24ticks (4 contracts)
 Winner = 35ticks (4c)

• 1.45 RRR

o Way too risky trade!

 20 tick stop
 5 tick target
 10 trades

• 9 winners = 45 ticks
• 1 loss = 20 ticks

o +25t profit

• 7 winners = 35 ticks
• 3 losses = -60ticks

o -25ticks

– Which levels of S/R should be avoided? Which should be used for entries?

o Open/Close = avoid
o HOD/LOD = Yes!
o PHOD/PLOD = Yes!
o Auto Levels

 Red = Yes!
 Yellow (2-tops/bottoms) = Yes!
 Big Round Numbers = avoid

o Swing Highs/Lows =Yes!
o Yellow Trigger Line = Yes!
o Trend Lines = avoid

 TL’s are sloppy, sometimes its hard to tell when the TL is broken or when its holding

 Use TL’s to look for price reversals and profit targets, but I like to enter my trades a little away from the TL

• Look for a pattern around the TL, but never use the TL as the entry level.

– What times do I use for OHLC

o 24-hour chart (12am , 12am finish)
o 4-range chart to confirm the levels

– What do you do if you miss the move?

o Wait for the next one, follow your rules and entry with confidence
o Short = sell the retracement off these new lows
o Long = buy the pullback off the new highs

– Pace of Tape Indicator

o How does it work?

 Measures the SPEED of the orders coming into the market
 Does NOT count contracts, each order larger or small is counted as 1
 Use the POT to define market sentiment

• Is speed rising?
• Is speed falling?
• If price is rising and speed is falling we avoid the long trade and look for the reversal
• If price is falling and speed is rising, im looking to trade short
• Increasing speed confirms the move
• Lack of speed (decreasing) disqualifies the move.

o What is fast?

 Yellow or green

o What is slow?

 red

o What is the most important thing to watch for?

 Increasing vs. decreasing
 I use this information to make educated decisions

• Speed increasing confirms the move
• Speed decreasing negates the moves

– Max Loss each day

o 2 full stops in one day and im done trading live

 Then move to a sim account
 The goal is to earn my CONFIDENCE back

o 2 different types of losing trades

 You made the mistake
 The market decided to do something else

o If I exit the trade early ( cut the losses early) this will NOT count towards my 2 stops
o Never stop trading, move to demo
o My daily goal = $1,000usd

 Don’t stop trading!
 Move to a demo
 Cut your size in half
 Maintain that confidence that ive worked so hard to develop.

– What is the Fast Track Method

o The best place to begin
o Uses the 1:1 Risk/reward ratio
o Check the video on the blog
o Goal was to develop a trading method that uses low risk/reward

 Limit orders for entries
 Slower timeframes for the best pattern
 Simple trade management

o I want you to practice for 2 weeks
o Then live after 2 weeks of practice
o We train on this in our members training every week
o 65% winning ratio, 1/1 r/r, so you always make money on the FT Method.

– Swing Highs and Swing Lows Indicator

o Light blue lines
o We use these to take our entries
o Using Higher Highs & Lower Lows in our Trading

– Using momentum, what do we look for?

o Perfect for our entries
o Long = rising momentum from the lows

 Be aware of overbought momentum b/c it may curl over and shift down

o Short = falling momentum from the highs

 Beware of oversold momentum, which can easily curl up against us.

o We use multiple timeframes and the momentum indicators to tell whats happening on the fast, medium, and slower timeframes

 Long trade on the 13range

• I will check the 21 range momentum for it to confirm also

– How long does the training process take?

o 2 weeks of learning (1-on-1, skype calls, emails)
o 2 weeks of practice on a demo

 I give you charts, data, indicators, templates

o Trading Live

 Start on the Fast Track Method

• 2 week of live trading on the FTM
• Add 1 contract for every 1k you make or every 2 weeks, whichever comes later.

– Best time to trade Aussie and Yen

o Early evening of the US Session
o 6pm EST – 3am EST best times for these markets

– Getting in and getting out quickly, what’s the secret?

o We talked about this in training on Wednesday
o Check the video, will be posted later today