This two-week trading period (because of Thanksgiving) involved a total of eight trades in the MES future contract, resulting in a notable net profit of $687.50.
The most important takeaway is the importance of effective risk management. The account recorded five losing trades versus only three winning trades, translating to a low overall win rate of 37.5%. However, the favorable profitability of the winning trades sufficiently covered losses and led to a positive overall gain. The total gross profit stood at $896.25, while the total gross loss was tightly contained to $208.75. This performance suggests good discipline: focusing on limiting losses quickly and allowing profitable trades to develop.
Risk and reward analysis
The performance of the strategy can be assessed by examining the average trade outcomes. The average size of a winning trade was $298.75, while the average size of a losing trade was kept relatively small at $41.75.
This means the strategy maintains a favorable risk-to-reward ratio of approximately 7-to-1. This suggests that the average successful trade is large enough to cover several losing trades. This profile provides a decent margin against unfavorable market movement, indicating a prudent approach to capital management.
Strategy deep dive
Trading activity showed a tendency towards shorting the market, which proved generally effective:
Short trades (selling): Six short trades were executed, which were the foundation of the period’s profit. The net profit from short trades was $817.50. The two most profitable trades, winning $412.50 and $408.75, were both successful short positions, showing an ability to capture downward momentum.
Long trades (buying): Two long trades were attempted, resulting in a combined net loss of -$130.00. These two trades were unsuccessful. The single largest loss of the period, -$116.25, came from a long position, suggesting that the current market environment or the specific setup for long trades was less favorable.
Summary of Findings
Overall, the profitability of the short positions was the primary driver of the positive net results during this trading period, effectively compensating for the losses incurred on the long side. Maintaining the demonstrated risk-to-reward discipline appears central to the strategy’s success.