How to figure risk to reward (a formula)

[clayton4115]

opened the position yesterday before close.

 

[clayton4115]

why would i want to put up false returns, the only person i will be fooling is me!

 

[The_Bman]

Interesting thread - Maybe should be in a CFD one.

I don't know much about CFDs and absolutely agree the return is 1.66%. And trading without an exit plan before entry is crazy.

However if Clayton really likes his formula aren't the denominators the same?

E.g. If he buys $3000 parcel with $300 of his own dollars and then exits for $80 return - ROE is 3% & Clayton's Magic formula (let call it the CMF return) is 27%

However if he loses $500 it would be -17% and -167% respectively.

He just needs to clear he's measuring CMF

 

[clayton4115]

yes calculating ROEs is spectacular when you make money, its even spectacularly bad when you lose money! like the CTX example before!

 

[clayton4115]

this is a trade i took a while back 14/5

Sell QAN
Price $1.945
Units 3500.00
Total Outlay $6,807.50
Margin 5.00%
My Ety $340.38
Sell date 18-May
Price $1.85
Profit after Bkge $318.50
ROE 93.57%

 

[clayton4115]

ok here is a live trade,

just traded CSR
SHORT
Qty 5000
Price $1.685
Margin 5%
My Ety $421
Total Exp $8,450

lets see how this one pans out.

 

[beamstas]

Clayton, i thought you were a FP?

You are playing a very dangerous game IMO

 

[clayton4115]

yes i am a FP, i would never ever do this with other ppls money, firstly it would never be allowed by my licensee anyways.

 

[clayton4115]

opened another Short with CTX at $12.59, its sinking like the Titanic!

 

[skyQuake]

Do you hold overnight or just intra-day trades?

 

[clayton4115]

ok here is a trade i placed yesterday which hit my limit order (small trade)

MAP SHORT
SELL $2.30
Units 500
Total Exp $1,150.00
Margin 10.00%
My Ety $115.00
Close Date 4-Jun
Buy Price $2.22
Profit After Bge $28.00
ROE after Bge 24.35%

 

[clayton4115]

hi SkyQuake,

most times i close position before close,

however i am currently holding two positions overnight right now, CTX and CSR as i feel the DOW will fall again tonight and im bearish on those two stocks.

 

[skyQuake]

Cheers. Does having such a big exposure (relative to risk capital) to overnight gaps worry u?

Do you have price targets for them tomorrow, and alternatively, stops? Or would that depend on the chart to manage your exit.

 

[clayton4115]

hi yes it does worry me sometimes, especially my bigger positions (CSR) for example im holding overnight,

however i use my charts to back up my belief, for example, CSR is trading close to resistance atm, so if it were to go up it would find $1.75 and above difficult, my mental stop loss is at $1.77 - $1.80.

By leveraging so high margin for error is critical. With CSR for every cent with me or against me i make / lose $50, so i am only looking for small movements before i exit, even a 2 cent move and i make $88 (after brokerage).

p.s it closed at $1.67 so i am currently up $88 or 20.89% ROE

heres crossing fingers and toes for another down day tomorrow.

 

[beamstas]

hi yes it does worry me sometimes, especially my bigger positions (CSR) for example im holding overnight,

however i use my charts to back up my belief, for example, CSR is trading close to resistance atm, so if it were to go up it would find $1.75 and above difficult, my mental stop loss is at $1.77 - $1.80.

By leveraging so high margin for error is critical. With CSR for every cent with me or against me i make / lose $50, so i am only looking for small movements before i exit, even a 2 cent move and i make $88 (after brokerage).

1% of your account per tick
You'd better have positive expectancy or you'll be gone by next friday

 

[clayton4115]

ok, lol. my balance may be alot less, but i dont think i will wipe out my whole funds.

 

[ThingyMajiggy]

How long have you been trading like this clayton?

 

[clayton4115]

hi ive been doing this since 13 May when i opened my GOMarkets account.

SO by all means don't think i know much about trading, i am very inexperienced and a newbie at it.

 

[Trembling Hand]

hi ive been doing this since 13 May when i opened my GOMarkets account.

SO by all means don't think i know much about trading, i am very inexperienced and a newbie at it.

Why don't you open an account with CMC.

less margin required. Will make you trades even better

 

[clayton4115]

lol very sarcastic!