Blog - Latest News

Emini Day Trading Lessons: +14.75 Points – The Importance of Outlier Trading Days

Today was a good example of why I don't subscribe to the oft-repeated trading maxim of just making "a couple points a day" in the Emini S&P 500 (ES).  There's a lot of traders out there that are content to just call it a day if they can pull out two points but it makes me wonder, why sell yourself short?

Back when I started trading I was focused exclusively on Forex but the marketing wasn't really any different.  "If you can make 10 pips per day you can achieve all your dreams as a trader".

I never really understood why people were willing to focus on such small goals that didn't really make sense in terms of fully exploiting your trading edge.  If you're willing to stop after just making 2 points or making 10 pips, aren't you just limiting yourself only on days when you're actually trading well and the market is giving the best trading opportunities?

Letting Go of Emotional Weight

I saw this pattern repeat over and over.  People would be stop trading because they made their 2 points but when the market was erratic or they weren't trading their best they would keep going, even losing 5 or 10 points in the worst cases.  How does it make sense to keep your downside that wide open while putting a cap on your upside?

It's not wrong to say that if you can make 2 points or 10 pips each day that you can achieve your financial goals but what people fail to mention is that by keeping your goal so limited, you're actually making things HARDER on yourself than they need to be.  Since you're not really taking full advantage from those big outlier days with out sized profits you will be capping your potential and in turn making it so that the outcome of each individual trade feels even more significant.

After all, if you're just looking for a couple of points but each loss is a good chunk of that, how will you feel after you string a couple losses together?  If you know that you're only looking to take a couple of points at most then suddenly that hole you're in feels that much larger and the outcome of every trade carries that much more weight and emotion.

Instead, if you're willing to take full advantage when you're trading "in the zone" or when the market is simply giving great opportunities then not only do you have the possibility of outlier days but it also takes away a great deal of that trade by trade emotional strain.  Losing a trade or two isn't a big deal when a good day will net you 5, 8 or even 10+ points.

Take Advantage of a Hot Market

That's why today I took a Strike While the Iron is Hot approach.  Things admittedly started ridiculously well with one of my better reward to risk trades of the year.  Typically I max out at +5 point and am happy to take the profit there but after a bit pre-market drop and the potential for more downside given the momentum I opened things up and trailed a stop.  As you can see it got hit and I didn't pull out every point I could have but I still saw a pretty nice profit of 7.5 points on just 1.25 points of risk.  If I just took my 2 points on that and called it a day how wasteful would that have been?

Following that I reigned things in to my more "normal" target of +5 as a max and hit that as well.  Again, left some potential profit on the table but as I often remind myself in these situations that you "don't want to let perfection get in the way of profitability".

Keep Pushing Until Things Cool

In keeping with the Strike While the Iron is Hot approach I decided not to let up and to keep trading until the market told me otherwise.  In this case I actually did give a couple points back at the end of the day which told me it was time to wrap things up and I'm perfectly fine with that.

I know there's going to be days where I might need to give a bit back in a good trend to trade it until the end or in a volatile market to try and take full advantage but that's a worthwhile price to pay if you're trading well and the market is giving you plenty of profit overall.

Better to give back a couple points at the end of the day after making 10+ than just stopping with my 2 points and calling it a day, that's for sure.

 

The purpose of this journal is to focus on the trading PROCESS and the development of trading skill and intuition over time.  Most novice traders who are struggling to become profitable will focus on short-term RESULTS but it’s the PROCESS and following through on your PLAN that matters.  If you know your edge then trust that process, trade your setups and allow your positive expectancy to play out.

I recommend that all traders regularly track their process every day including their emotional states, market insights and intuitions, and how well they stuck to their plan.  My hope is that by sharing some of my thoughts I can encourage others to make a trading journal part of their process and perhaps even offer an insight or two that traders of all skill levels may find beneficial to their ongoing development.

Cody Hind
Latest posts by Cody Hind (see all)
/by

© Copyright - Samurai Trading Academy - RISK DISCLOSURE: Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. CFTC HYPOTHETICAL PERFORMANCE DISCLAIMER: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.
Emini Day Trading Lessons: +2.5 Points – Gauging Performance Through ...Emini Day Trading Lessons: +5 Points – Trends Aren’t Always Easy...
Send this to a friend