Volatility Versus Risk In Trading

Friday: October 9th, 2015

Volatility Versus Risk In Trading

Crude Oil Trading

What can I say … I had to eat a piece of humble pie on Wednesday as I hit my Max Daily Loss and lost my Funded Trader Account to boot for my stupidity. I will talk more on it as I feel like talking about it.

CLPORT Method: Trade #1 Short 2 at 5000 at 8:11AM CST.

I think one of the toughest things about trading is getting back up on the horse after it has kicked you off … I am working on the $50K TST Trading Combine now; instead of, the $30K TST Trading Combine.

I am starting my sequence at 2 trades now. I would like to move to breakeven on the move to 1P, but you have to respect the $50 a barrel level on this trade. I am looking for a 3P profit target on 2 contracts on a Friday.

Crude Oil Market reaches down to 1P and then marches back to $50 a barrel. I took what I could from the trade … trading 2 contracts. 1 Contract off at 1P at 4972 and the 2nd contract was removed at 4997 a little bit later as the market went back to $50 a barrel.

Profit Factor on trade was 31 vs 26 ticks overall. I was risking 2 trades at 13 ticks. I was able to get 28 on one and 3 on the other as it moved back to breakeven and back to the 5000 level in the crude oil market.

Over the years, I have debated about how many ticks I should take on the 1st contract … should it be 1P … 2P or 3P? This has and will be a continual debate for me. Today I wanted to give the market room to run down quickly, and then I took the off as the market was getting stronger on the way up as the trading chart shows above.

Trading is definitely a balancing act. But the most important overall component as it relates to TST is to NOT ruin your chance at trading real money. I did this on Wednesday. As you know, I don’t like to track my dollars versus ticks, and I ran into the max daily loss as I had my 1R at 23 ticks on Wednesday. I took two quick losses and it brought me over the mark with slippage and I lost my funded account.

I am not eligible for the Trading Redevelopment Opportunity, because I broke rule number one, which is very disappointing. So to protect myself for myself I have moved to the $50K TST Trading Combine.

Yep … I am back in the TST Combine … sucks to be me man! I had only 5 days in the TST Funded Trader Account before I screwed it up. It isn’t the loss I am disappointed in as I have had much greater losses and recovered from them.

My disappointment comes in the fact that I was in … and now I am not. I was looking forward to a cash Christmas, now this will not happen. I got the cart before the horse.

Volatility versus Risk is a very key component to your trading plan. But as you are trading at TST, you also have to consider risk of ruin against the Max Daily Loss everyday. I have been very good at stopping before I got to it. This didn’t happen on Wednesday and I am paying the price for it.

At first, I thought I would be eligible for redevelopment, because the paragraph doesn’t mention anything other than a negative balance to go into redevelopment. I still honestly believe this is true, but those with the gold make the rules don’t they!

We will continue this discussion on Volatility versus Risk on another training blog post.


Good Trading and God Bless,

David M. Knight

P.S. I will restart my TST $50K Trading Combine on October 13th, 2015: Day 1. Sucks to be me, man!

About The Author

David M. Knight

I am a 30 Year Futures and Commodities Trading Veteran. In addition, I enjoy games of skill and chance like: poker, craps, blackjack and roulette. During my professional career, I have developed and implemented successful trading strategies and methods; along with winning systems in games of skill and chance. Join with me on our mutual journey together.

  • […] Volatility is defined by how much the average movement of the market you are trading  is moving on a day to day basis. For instance, a 1R or 10 tick movement in Crude Oil is less volatile, than a 3R or 30 tick movement for a stop loss. In dollar cost, this is $100 versus $300 as it relates to the Crude Oil Market. […]