Friday, 5 November 2010

Beamer and Profit Targets

While Candace and I were in New York City recently we were, of course, walking along 5th Avenue in mid-town and could not resist going into the electronic shops. I have been doing this since I was 17 years old when I first went to NY with my parents.

I remember my first time in one of those "going out of business" shops. This was 1963 when people were not so experienced. We came away with a lot of "bargains" that didn't turn out to be such bargains, but we had a lot of fun. In those days, it cost an average year's salary to fly to NY from Australia, and the Americans had not yet found Australia on the map. We loved it.

Anyway, I've been going back to NYC regularly and no matter how smart I think I am, I usually pay my "taxes" to those guys around 5th Avenue. This time it was the Beamer. The guy brought out this tiny projector which I could connect to my laptop and screen my presentations and movies onto a wall 6 feet wide. He offered me a "superb" deal. Usual Price $2,300, but I could have it for $1,500 because of "stocktaking". He demo-ed it and we loved it. Seeing a bit of sticker shock, he rushed to his laptop and went onto Amazon's page and showed us the identical Beamer for $3,999. Wow, what a bargain!

Candace and I could barely restrain ourselves. But old memories die hard and we left. We smelled a rat. On our walk along 5th Avenue, we walked into a similar store. Surprise, they had a Beamer, but not the same brand. They immediately clicked on their Bookmark on the laptop and proudly showed a site for the beamer with a price of $2,999. He said we could have it for $699.

Now the promised bride was way too beautiful and we headed for the hills. Needless to say, when we went back to the hotel, those "internet" sites were not findable. Amazon did not have the Beamer at $3,999. These guys were looking for a trade with a far away target that they did not hit often, but when they did it was a big payoff and this is the subject of the post.

Which is better? To make lots of winning trades with surer, tighter targets or fewer winning trades but with a big payoff. This is a critical part of a trading plan. It is a critical part of your back testing. It is a critical part of your business plan, and you need to decide whether lots of high win rate profits are "better" for you than an occasional outlier.

For me, it's a no brainer. I can't be like those guys on 5th Avenue hoping for the occasional fly to fall into their web. I need the sure, quick gratification of making winning trades and my whole trading plan is made based on this. I teach my students to test and test and test, so that they know their trader's profile. If you know what to expect, then you can pull the trigger and also trade more contracts as the market gives you the capital.

I still love New York. It never disappoints me.

One of the great guys on the course in Chicago drew my attention to the YM. I hadn't looked at in a while. I traded it today after the employment number. The third trade had no juice, as I was pushing in the wrong direction against some accumulation, as you can see from the smoothed Cumulative Volume Delta. I had a few other Euro trades. All in all a pleasant day. Still a bit jet lagged.


  1. HI EL,

    your last trade was a loss. Should be 69 ticks in profit instead.

  2. omega, you're right. It certainly was a loss. The spreadshet is too used to profits :-) It lost the minus sign somehow and I not a very good clerk

  3. Hi EL,

    Your pictures are showing the volume ladder recently. How do you use the volume ladder? Do you use for confirmation?


  4. The spreadsheet is fixed now. Thanks for finding the error.

  5. I remember when I was younger and starving. I'd head for Mickey D's, order a Big Mac and wolf it down in two huge bites. Nine times out of ten, ketchup, mayo and pickle all over my tie and trousers, serious indigestion and no idea if it tasted any good or not.

    Now I take small bites, no mess, no fuss and when I'm done I can say wow did that taste good!

    Trading is much the same, small bites make you go wow at the the end of the month.