Trading Secrets Revealed 2.0 © – Q & A| David JenynsDavid Jenyns Appendix: Q&As Questions 1) What is the ATR and what does it measure? 2) If a trader has a float of $50,000 and

TradingSecretsRevealed2.0©–Q&A|DavidJenyns1


TradingSecretsRevealedDavidJenyns

Appendix:Q&As

Questions

1) WhatistheATRandwhatdoesitmeasure?

2) Ifatraderhasafloatof$50,000andiswillingtorisk2%ofherfloat,what

wouldbehermaximumlossonanytradeifsheweretoclassbrokerageasacontributiontoalossassuming$20brokeragetobuyand$20tosell?

3) Whatistheformulausedtocalculatetradesize?4) AtraderdoesheranalysisanddecidesstockXYZisabuy.Aftercalculatinga

2xATRinitialstopshecomestoastoplosssizeof25cents.Thetraderhasafloatof$30,000.HowmanyunitsinXYZdoesshepurchaseassuminga2%risk?

5) (RefQ4)Thetraderabovebuysthenextdayatapriceof$4.26througha

brokerwhocharges$30.Whatisthetotaltransactioncost?6) (RefQ4andQ5)ThesharesinXYZadvancethenextday,achievingahighof

$4.42andcloseat$4.38.Thetraderisusingatrailingstopwiththevaluebeingequaltotheoriginalstoploss.Atwhatpriceshouldthetraderpositionhertrailingstop?

7) Atraderhasa$30,000tradingfloatandishappywithamaximumlossof2%.

Calculatethetradingfloatremainingaftersixconsecutivelossesandthetotallossaftereachtrade.Remembereachtradewillrisk2%ofthecurrentaccount.Trade1:___________Trade2:___________Trade3:___________Trade5:___________Trade6:___________


8) Calculatethetradingparametersbelowusingthefollowingdetails:

Float $50,000 Price $1.05 Stoplosssize $0.08 Brokerage $30 2%risk= ___________ Initialstop= ___________ Tradesize= ___________

Purchaseprice= ___________

9) AtradepassesallyourentryconditionsandyoudecidetobuyXYZatopen,on05/02/09.Youhaveatradingfloatof$50,000andhave3xATRinitialstopset.Fillintheblanksbelow(usingfigure1.0):

Float= $50,0002%risk= ___________ATR= $0.08Initialstop= ___________Tradesize= ___________Brokerage= $30Purchaseprice= ___________

Usethe3xATRmethodtodetermineyourtrailingstops,fromthehighesthighsinceentry.Calculatethetrailingstopsandplacetheminthetablebelow.Youareusingendofdaydataandthereforesellontheopenofthedayafteryourtrailingstopishit.Youdecideyourstopistriggeredifthere’saclosebelowthestop,notjustanintra‐daybreach.Figure1.0:Tradedata

Date Open High Low Close ATR Trailingstop

5/2/09 3.7 4.62 3.7 4.62 0.08

8/2/09 4.45 4.8 4.41 4.68 0.08

9/2/09 4.715 5.35 4.715 5.28 0.08

10/2/09 5.5 5.5 4.55 4.56 0.08

11/2/09 4.802 4.802 4.1 4.173 0.08

12/2/09 4.41 4.8 4.27 4.67 0.08


Usingfigure1.0,whatdateisthetrailingstophit? Totalsaleproceeds= ___________ Profit/loss= ___________ ROI= ___________ 10) Youwanttogrowyouraccountapproximately2%permonth.Youhavean

accountof$10,000.Howmuchwillyouraccountgrowtoinayearusingthecompoundingprincipleassumingthatyoumeetyourtargetof2%permonth?

11)Fillintheblanksonthechartsbelow:a)InitialStop=$2.87


b)InitialStop=$1.39

c)InitialStop=$1.39


Answers

1) Thetruerangeindicatoristhegreatestof:

• thedistancefromtoday'shightotoday'slow• thedistancefromyesterday'sclosetotoday'shigh• thedistancefromyesterday'sclosetotoday'slow.TheATRisamovingaverageofthetruerange–itdisplaysvolatilityoftheselectedtradinginstrument.

2) 50,000x.02–40=$9603) Maximumloss($)/stopsize($)4) 30,000x.02=$600maximumrisk

600/0.25=2,400unitstopurchase5) 2,400x4.26+30=$10,2546) 4.42–0.25=$4.177) Trade1:Loss$600;tradingfloatdecreasedto$29,400

Trade2:Loss$588;tradingfloatdecreasedto$28,812.Trade3:Loss$576;tradingfloatdecreasedto$28,236.Trade5:Loss$564;tradingfloatdecreasedto$27,671.Trade6:Loss$553;tradingfloatdecreasedto$27,118.Aftersixsuccessivelosses,thetraderhadatotallossof$2,882!

8) Float $50,000

Price $1.05Stoplosssize $0.08Brokerage $302%risk= $1000Initialstop= $0.97Tradesize= 1000/0.08=12,500Purchaseprice= 12,500x1.05+30=$13,155

9) Float= $50,000

2%risk= 50,000x.02=$1,000ATR= $0.08Initialstop= 3.70–0.08*3=$3.46Tradesize= 1,000/(0.08*3)=4,166.66Brokerage= $30Purchaseprice= 4,166x3.70+30=$15,444.20


Date Open High Low Close ATR Trailingstop

5/2/09 3.7 4.62 3.7 4.62 0.08 4.38

8/2/09 4.45 4.8 4.41 4.68 0.08 4.56

9/2/09 4.715 5.35 4.715 5.28 0.08 5.11

10/2/09 5.5 5.5 4.55 4.56 0.08 5.26

11/2/09 4.802 4.802 4.1 4.173 0.08 Sellonopen

12/2/09 4.41 4.8 4.27 4.67 0.08

Whatdateisthetrailingstophit? 10/02/09Totalsaleproceeds= $4.802x4166–30=$19,975.13Profit/loss= 19,975.13–15,444.20=$4,530.93ROI= 4,530.93/15,444.20=29.34%10)

Month Totalaccountvalueat2%

monthlygrowthandcompoundingthewinnings

Jan 10,200Feb 10,404Mar 10,612Apr 10,824May 10,041Jun 11,262Jul 11,487Aug 11,717Sep 11,951Oct 11,190Nov 12,434Dec 12,682

$2,682fortheyearrepresentsayearROIof26.8%.


11)a)

b)


c)

Importantnote:Thepositionsizingcalculationresultexceedsourmaximumlimittherefore,itwouldbeadvisedtoscalethepositiondowntobenolargerthan15%ofthefloat(i.e.$7500).Thecalculationforthiswouldbe:$7500/1.47=5102.04(roundeddown)Positionsize=5102shares.

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Trading Secrets Revealed 2.0 © – Q & A| David JenynsDavid Jenyns Appendix: Q&As Questions 1) What is the ATR and what does it measure? 2) If a trader has a float of $50,000 and