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« Emini Futures | Trading The Order Flow | Main | Emini Futures | Trading Emini Tick Charts »
Tuesday
May292012

Emini Futures | Realistic Trading Expectations

(QQQ)(DIA)(SPY)(GLD)(SLV)

Realistic Emini Trading Expectations

I have labored the past few months to create a series of videos which outline what I believe to be realistic potential for those with a desire to daytrade the S&P 500 Emini Futures. Today I have prepared a chart for you which begins with the opening bell. What you will see:

  • Every trade setup
  • Every entry both long and short
  • The entry price as provided by our system "to the tick" (before the trade)
  • The distance each trade moved (maximum potential)
  • The trades that got stopped out (we only risk 2 points per trade)
  • How we turn Maximum Potential into Realistic Net Potential

Before I get to the chart let's discuss realistic potential. The average true daily range for the S&P 500 Futures is 18 points. This number can be somewhat misleading, pull up a daily chart and you'll see exactly what I mean. We have had quite a few abnormal wide range days of late that skew the data to a degree. If you look left on your ATR scale, not long ago the ATR was closer to 13. No matter which number we use, it simply means that if you bought the absolute low of the session and sold at exactly the high of the session, that would be considered maximum potential.

Can we look at a chart after the fact and see that in fact it really did happen? Yes. Does that make it realistic potential? Not for me. How often have you bought the exact low of the day and then exited at the peak? If you've done it more than once then I want to take your class. It's a difficult task at best. So let's move in to the realm of what is realistic. Just as we can measure the average true range of a daily candle, we can also measure the swings of the market on an intra-day basis. The S&P rarely moves in a straight line. It channels back and forth whether it's in a uptrend, downtrend, or just trending water.

We do know that the "average" swing is 3-5 points. Does that allow for some swings to be 2 and others 9? It certainly does. However, armed with the knowledge of what an average swing looks like, we don't attempt to call the turn. Picking tops and bottoms can be risky business. Our approach is to allow a swing to get underway and simply scoop a few points out of the middle. Sound simple?

That's our motto:  Trading's Not Easy But It Can Be Simple!

Now for some, it's a little too simple. Let's do some simple math -

2 Points per day X $50 per point X 1 contract = $100

For the 1 contract trader I agree that's hardly living high on the hog. But what happens as that trader works his way up the food chain and becomes a 5 contract trader?

2 Points per day X $50 per point X 5 contracts = $500

Now that a little more appealing right? In fact, day in and day out with an average of 20 trading days per month that just might pay the mortgage and buy the groceries. Yes?

Perhaps a year or two or three goes buy and soon your confidence level is at a point where you calmly trade 10 contracts without breaking into a cold sweat. Can you picture that?

2 Points per day X $50 per point X 10 contracts = $1,000

Now that might pay the mortgage, buy the groceries and send Junior to college. However, I would be amiss if I didn't tell you this - Trading is risky and you can lose all your money!

Why is that? Why do we read such alarming statistics about the failure rate of traders? I believe it comes down to this very subject - Reasonable and Realistic Expectations.

I had to create 2 charts to get all of today's trades on them. The purpose of this chart is to point out the myriad of opportunities that each day brings. If you have a long bias or short bias then your opportunities will differ from the trader who is willing to trade in the direction of order flow whichever direction that happens to be.

One final thing to keep in mind, the more times per day you expose yourself to the market, the greater the risk. The best advice I can offer is to establish a daily goal and stick with it. That can be especially difficult for new traders. Ask yourself "How much money do I want to make today?" If the answer is "As much as I can", you have embarked on a journey that is both tortured and without end.

Observe the charts.

Understand the opportunities.

Establish Reasonable and Realistic Goals.


S&P 500 Emini Futures

Here are the trade setups from Tuesday May 29, 2012.

 

ES 05/29/12 (click to enlarge)

 

ES 05/29/12 Part 2 (click to enlarge)

 

Drop by the Live Trading Room and I'll show you these same charts with our indicators applied and answer any questions you have about realistic expectations.

 

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Emini Podcast for Tuesday 05/29/12

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    NFL is genuinely 1 of the biggest sports in America. It has a significant following.

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