Emini Day Trading Lessons: 10 Points – Wild Moves and Managing Risk
So it finally seems to be settled. The long awaited resolution to government shut-down and the debt ceiling is at hand and... nothing of note was accomplished. Well, except for maybe a serious hit to US prestige.
It's been a somewhat vexing time for traders lately because the uncertainty has forced us to be a bit more conservative than usual. Price has been jumpy, some moves take off out of nowhere without looking back, and levels are a bit harder to define. Still, there's been good points to be made week after week so even if it's a bit harder work to be a day trader right now, it's still a pretty nice profession to have and you will hear few complaints from our traders.
Consider the Market Context
One of the things I talk about a lot in the recap video below is being aware of the market context. If you don't understand the bigger picture and the overall structure of the market, you're probably going to get burnt.
Many newer traders struggle with this for a long time. They come to the market each day hyper focused which sounds like a good thing, but by putting all their energy into what's happening in the last few bars they miss what the market is trying to tell them in the grander scheme.
A trader needs to be aware of both the big picture and the recent reactions of price if they're going to be consistently successful.
By having a plan for breaking down the structure of the market, a trader can easily keep their focus on what's happening right now while still maintaining a good overall perspective. This is why I always tell students in the STA Training Program that it's not the entries that matter, it's the SETUPS.
A trader needs to be able to understand where we are in the context of the overall market, what the short term momentum situation is, and then must be able to fully assess the risk factors so they will be able to manage their trade accordingly. By doing this, they can take a calculated trade with a high expectancy for profit.
"Plan your trade and trade your plan."
Keeping Safe in Uncertain Markets
Another lesson from today was understanding when the market was presenting lower percentage trading opportunities that were balanced by exceptionally high reward.
Another common trader mistake is thinking that you must maintain an extremely high win rate (usually 70%+) to succeed in the markets, but most who have been in this game for a long time will tell you that the win rate doesn't really matter. What matters in your win rate combined with your reward to risk ratio.
You can have a low win rate but if your reward to risk is high then you can still make a considerable amount of profit.
Many trend followers take this to heart and lose often, but ride trends for an exceptionally long time and make massive profits in each winning trade.
So when I was presented with a couple of low percentage trades today due to the the way the market was structured, I wasn't concerned. I assessed the risk factors, considered the potential reward, and managed the trades accordingly. It took three tries to catch the long I was looking for, but even with a couple failures it was still a nice profit overall.
ES Day Trading Recap Video
If you have trouble viewing this video, you can watch it at YouTube HERE.
- Strike While The Iron is Hot - March 1, 2021
- The Path to Becoming a Full Time Trader - February 22, 2021
- Looking to 2021 and Beyond - January 20, 2021
