Lesson 05

Room: is the trade worth it?

Measure the distance to the next level in stops, and in percent.

In one lineA good level with no room behind it is a target, not an entry.

Room, in stops

Every if-then line has two distances. From entry to wrong is what you risk. From entry to the next level is the room you have before the market reaches someone else's decision. Divide the second by the first and you have the room in stops.

A line with half a stop of room asks you to be right, fast, into the next wall. A line with three stops of room can be a bit early and still work. Neither number is magic; what matters is that you know it before the bell, and that you decide your own minimum once and keep it.

Ten points of risk, thirty points to the next level: three stops of room. The same entry with the next level ten points away would be one stop, and a different decision. Illustration from simulated prices, not a real session.

The calculator

Change the numbers. Prices are NQ points; dollar figures use $20 a point for NQ and $2 for MNQ. A calculator, not a recommendation.

Why percent, not points

NQ has roughly doubled since 2021. A 40-point stop on NQ at 13,000 is about 0.31% of price; at 26,000 it is about 0.15%, half as wide in market terms. If you learned your stop sizes in points from an old video, they are now half as wide as the person who made it meant them to be. Think in percent, convert to points each morning.

Room for the day, not just the trade

Do the same sum for the whole map: the distance between the nearest level above and below, in stops. On a quiet, tight overnight the levels can be so close that no line on the card has room. That is information too. It tells you the plan for the open is "let it pick a side", and which lines come alive once it has.

Size is the last part. Decide what one stop costs you in dollars before the session, and let the stop distance set the contract count, not the other way round. The calculator's dollar rows are there for exactly that.

Key terms

RiskEntry to wrong, in points and percent.

RoomEntry to the next level on the map.

Stops of roomRoom divided by risk.

Minimum roomYour own floor, set once, below which a line is skipped.

Try it

For every line on tomorrow's card, put the stops of room next to it. Cross out any line below your minimum. Notice how many of the trades you have taken in the past would have been crossed out.

AXIS Desk · The Pre-Market Plan · free. Education only, not trade advice. Futures trading involves substantial risk of loss; past patterns do not guarantee future results.