CL Power Trading Method

Volume Versus Risk In Trading

VOLUME Versus RISK in TRADING

In my humble opinion, I have struggled as a trader in placing the R over the years working on the CL Power Trading Method. In other words, should I be at 1/2R, 2/3R or at 1R on my stop loss after I enter the trade.

Most of the time, 1/2R is enough to make the trading decision on the CLPORT Method, but at select times it is not the optimum level for the stop loss.

Trading days like today happen where I take on more trades that I would like trying to position myself on the trade. Before I can get positioned for the profitable day, I run into my max daily loss inside the trading day.

Looking at the chart below on our blog post, and the video that I placed up on YouTube, I hope this helps you in your trading as it will help in my trading decisions going forward.

By implementing the R-Risk versus the V-Volume in Trading … I will be in effect allowing the market volume spike bar to determine how many ticks I should be risking on any given trade.

In a nutshell, I have determined a level of ticks for a stop loss from 400 in Volume to above and beyond 2,500 in Volume on one bar.

In today’s trading example, we had a volume spike bar of 1725 at 7:39AM CST. This means it is above 1000 in Volume … so this should tell me for my CLPORT Method trade I should use 1R-Risk today.

Today, this would have meant a 23 tick stop loss on the trade entry of 4425. This would have placed the stop loss on the long signal at 4402 in the crude oil market.

I hope this helps in your trading as much as it has helped me … bottom line … you need to determine how far and how much you should be willing to risk on any given trade.

 

Good Trading and God Bless,

David M. Knight
TradeCraze

P.S. My Interview with Eddie Horn at TopStepTrader is to be on September 28th, 2015 at 12:30PM CST.

 

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.

  • […] Velocity is more specifically how “fast” the current market is moving. When you are trading the Crude Oil Futures Market, then this can be best seen right at the open of the trading session in the USA. Velocity is also closely tied in with Volume. […]