It seems like forever since I last posted a recap even though its only been a couple of weeks. I plan to keep them coming far more regularly now that I have a lot of my other work wrapping up. What work is that? Mostly it's a lot of behind-the-scenes stuff here at Samurai Trading Academy as I fine-tune the curriculum that will be available in the near future.
In the past year I've been working with a number of Forex traders (another market that I trade) and one request that regularly comes up is that they would like to see a more involved training approach in live markets each day. I first considered doing this in Forex but the working day is just too long and there are too many times where the market is flat for extended periods of time.
I gave it a lot of thought and eventually came to the conclusion that the Emini S&P 500 is the perfect market for those who want to learn to be professional traders.
While the Forex markets are where I started as a trader, I've also been trading Emini S&P 500 (ES) futures for years and they are a fantastic trading vehicle. In only a couple of hours each day we can get plenty of opportunities and it has low barriers to entry. Even when the markets are fairly slow as they have been most of this week there are still good trades to be found every day where we can pull some points out of the market.
As mentioned, one major advantage of trading ES is the advantage of low barriers to entry. Many people think of day trading and imagine people sitting at their desks buying and selling individual stocks all day. But did you know that if you take four or more stock trades within five business days that the SEC rules define you as a "Pattern Day Trader"? If you are ruled to be a Pattern Day Trader it means that you will need a minimum of $25,000 in your account to keep trading in this fashion.
I know very few people who are just learning this business who are willing to put up that kind of cash but luckily if you are trading the Emini S&P 500 (ES) then extremely restrictive day trading rules like this don't apply to you. You can get started in ES with as little as $2,000 though I would recommend most people start with at least $5,000 if possible. There are a lot of other advantages out there too which I will go into in a future article but if you are still somewhat new to trading I would highly recommend you check out ES as it is a great market for learning the trading craft.
Now on to today's recap. It looks simple but this was actually a fairly difficult day to trade as it required a lot of discipline and patience to take the quality trades at the right time. We need to know when NOT to trade and have rules for these situations, while at the same time having the ability to re-enter a move as long as continues to prove itself. As you can see after some initial swings today we were able to use our strategy to avoid the riskier situations and still take some trades into a major level and extract some points from the market before the eventual breakout. Oh, and if you're wondering why I consider my break-even trade to be a loss for the purposes of the 80% win ratio, it's because with commissions and fees it does have a negative cost even if we don't lose any ticks on the trade.
Things started off with a short at the market open. This trade was looking perfect right up until the moment it turned with considerable momentum. I was quite disappointed as I had my order waiting at 1510.75 and I simply didn't get filled on the edge. This doesn't happen often but when it does it is certainly frustrating. An almost perfect trades ends up with nothing! I had hoped to continue holding for another move lower towards 1510 but the strong momentum forced me into a break-even situation. There wasn't even a good chance to take a point or so on a stall. Oh well, this is just a part of trading sometimes.
Don't let lost points get into your head and bring you down. If it happens just accept it and move on. There's always another good trade to be had.
Strong momentum to the upside gave us a clear signal for our second picture-perfect trade of the day. This one was good for 2 points right into the resistance zone. This is where things got trickier and we needed to be ready for whatever the market might do. I followed my rules and didn't automatically take a trade on the pullback but instead I waited for some confirmation to the upside. It turns out that taking trades automatically in these areas would have all worked today, but in real-time we don't know that will be the case. We need to think in terms of probabilities and we have to manage our risk in these situations. Since the market could easily turn here and move strongly to the downside it's best to wait for more information and a higher quality entry. I got what I was looking for according to the rules and went long again. Once we stalled I took a quick point. Notice I was only a tick from my take profit on the initial move but holding for another attempt up was simply too risky at the time when good money was already available.
An experienced trader knows how to read the market and take what it's offering, even if it isn't as much as the trader initially wanted.
From here we had a similar situation that worked out for another point before we finally saw the breakout. These areas show us the supply and demand equation in the market and if you know what to look for you can often time the breakouts quite well. Trading into levels carries additional risks and new traders are better off sticking to the higher quality opportunities but if you can read the signs you can often trade these and catch some high momentum moves. While our final trade did stall mid way along it was still quite clear that this was the point where the balance of supply and demand has shifted and we should see more upside. Our take profit was hit at the highs of the day for 3 points. This was also a key level for yesterday as well so after a lengthy consolidation our rules kept us out of any further longs and the market eventually shifted in the short term to the downside.
Overall a fairly slow and choppy day but there were still some excellent trades available. A beginner trader could easily make a couple of points in a market like this, which is really all you need to make trading a career or a substantial side income. Those home run days are nice but striking out and losing big money isn't any fun. An equity curve that whips up and down with big highs and ugly lows shouldn't be the goal even if some good money can be made at times.
Being a trader isn't about the number of points you get in a day or the money you made on one big trade, it's about consistency over time.
Latest posts by Cody Hind (see all)
- Volatile Markets and a Healthy Dose of Patience - March 20, 2020
- Emini Day Trading Lessons: +4.5 Points – Locking in Profits - August 27, 2019
- Emini Day Trading Lessons: +6.75 Points – Missing the Move - August 22, 2019