Emini Day Trading Lessons: +5.25 Points – Deep Pullbacks Within the Trend
Today was all about trading in line with momentum in both the long and medium term. Mistakes were made (as is always the case in trading) but overall the good decisions outweighed the poor ones and there were still some points to be made in the two hours I traded.
I didn't get in front of the screens early enough to catch the first long of the day which would have been good for a point or two. After the market open the price action was showing more topping action than I want (as per my trading plan) so I passed on this as well. Luckily it made a good move that created the conditions for a trade setup which I entered without hesitation.
Being patient and waiting for setups that fit your rules and give you confidence almost always pays off.
I started with a 2 point target here but the market very quickly convinced me that I was being too conservative. The pre-market had be trending up as well which increased my conviction in further upside. So I simply moved my target to a 5 point max and then began looking for signs from the market of when I should exit.
I got my signs after a couple failed pushes higher eroded my confidence in a continued hold. It turned out I could have got a few more ticks but I was more than happy to just have the 3.75 points in the bag.
One of the more difficult skills to learn in trading is how to continue pushing in a trend. Although we were starting to show a bit of topping price action there was still no reason given the overall momentum of the market to stop trading with the trend. I had an order in the market to do just that from 1523.50 but unfortunately I didn't get filled. After we held the highs a third time though I was glad to not be in the trade as I no longer had a compelling reason to think there would be more upside for the time being. If I was in I would have bailed with 1 or 2 ticks lost at most.
All the excitement of the upside move turned out to be very short lived as we then spent the next hour in a tight 2.5 point range. There aren't many ways to trade these but if very specific conditions occur we can do so with high probability and minimal risk.
That's really the key to trading on the edges - make sure your risk is as small as possible.
Blindly trading on the edges is usually a losing game so make sure you have your rules and conditions met and know in advance how you will deal with the reaction. In this case I was willing to lose 3 ticks at most so I brought my stop in. It worked out well and I simply went with the conservative exit point at the prior highs for 2 points. After all that waiting the last thing I was feeling was the need to be aggressive and greedy.
One last attempt to the upside didn't show much follow through which was always a risk given the initial break. I tightened up my stop and had a bit of bad luck as I was taken out on the exact edge of the pullback. This is just something I have to accept as an occasional result of tight risk management. Sometimes I get caught and miss out on some points but many times it works out in my favour. Looking back it may not have been the best decision but it also wasn't a bad one given the price action, so I don't have any regrets about the loss.
- 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
