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What are "points"?
Started:March 5th, 2011 (10:46 AM) by imnewtrader Views / Replies:2,104 / 22
Last Reply:May 18th, 2011 (06:08 PM) Attachments:1

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What are "points"?

Old March 7th, 2011, 12:28 PM   #21 (permalink)
Elite Member
Berlin, Europe
Futures Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker/Data: Interactive Brokers
Favorite Futures: Keyboard
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Posts: 9,525 since Mar 2010
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Have to stop this, before Big Mike's turns into a forum for breeding Dalmatians.

Points are quite useful, as you can use the point value of the contract to determine the number of contracts to trade. Let us assume that you trade an account of $ 50,000 and that you are willing to risk 1% plus slippage per trade. Also assume that you trade a 15 min chart and that your trade setups require a stop loss of 1.5 times the average true range over the last three trading days. Then the point value is an easy way to calculate the number of contracts to trade. Here are some examples using the point values (in bold)

YM: ATR 14.5 points, stop loss 22 points, risk per contract 22 * $ 5 = $ 110 -> position size 4 contracts
ES: ATR 1.9 points, stop loss 2.75 points, risk per contract 2.75 * $ 50 = $ 137.50 -> position size 3 contracts
CL: ATR 0.33 points, stop loss 0.50 points, risk per contract 0.50 * $1,000 = $ 500 -> position size 1 contract
GC: ATR 1.9 points, stop loss 2.7 points, risk per contract 2.7 points * $ 100 = $ 270 -> position size 1 or 2*) contracts

*) if you accept a risk of $ 540 plus slippage

The point is that the ATR is displayed in points, and that you can use the point value of the contracts to calculate your position size. The calculation of the position size is a two-step process, the first step involves defining a stop-loss which is required for your trading strategy under current market conditions. The stop loss is independent of the size of your account. The point value is only needed for position sizing.

So the point is that you should understand what is a point and how to use points and point values, because otherwise your trading will be absolutely pointless.

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The following 2 users say Thank You to Fat Tails for this post:

Old March 10th, 2011, 10:04 AM   #22 (permalink)
Just starting out...
Futures Experience: Beginner
Platform: multichart
Favorite Futures: stocks
Posts: 27 since Mar 2011
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Hi there! Thank you for being responsive to my thread. And, thanks for the information! i appreciate it very much!!

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Old May 18th, 2011, 06:08 PM   #23 (permalink)
Elite Member
Scottsdale, AZ
Futures Experience: Beginner
Platform: Ninja
Broker/Data: Mirus Futures/Zen-Fire
Favorite Futures: currency futures
Posts: 8 since May 2011
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Law of charts

imnewtrader View Post
what does the points means? where can i use it? well, it is very catchy for me. but i don't know if it is useful. I am sorry for not knowing it. but iwill be thanking for the people who will be able to answer it. thaks

I suggest you go onto the web and look up Law of Charts written by Joe Ross. I believe there is a free download of the material. It is excellent and I use the 1,2,3 and Ross Hooks in my currency trading.


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