Archive for ‘futures trading’

Why Do People Lose Money Day Trading- You don’t have to!

By trader7757, 10 March, 2010, No Comment

I was watching a newscast today and the reporter claimed that 90% of all people who embark on a career of futures trading lose all their money within three months. The story went on to sensationalize these traders plights by claiming that the hapless trader spent the families savings and mortgagedThat the house in pursuit of his dream of being a day trader.

And believe it or not, these stories are true. I wish they weren’t, but I see it on a fairly regular basis. Yet, I don’t understand it.

Many traders purchase a book or two on day trading and establish a demo account and trade for a few weeks and decide they’re ready to trade a live account. The results of this type of trading preparation are fairly predictable. These traders never had a chance because they were poorly prepared to trade and hadn’t spent the time and effort to understand how markets function and how trades are set up.

You would think common sense would be a great asset in trading, but nothing could be farther from the truth. Common sense will serve you very poorly in trading futures contracts. For reasons not fully understood, market sense is far different than common sense. I can’t tell you how many times I’ve seen government issued a report that ought to send the market skyrocketing. Yet, the market reacts very poorly to this good news and ends up tanking. The point is a simple one; there are many variables that go into stock market and futures contract pricing, and to focus on one piece of news is to miss the point.

Even more disappointing is the fact that had this trader taken the time to learn how to trade in a proper fashion he or she would probably still be trading profitably. I have a very good friend who is a very intelligent fellow. He has an MBA from an Ivy League school in business management. Like many people, he decided that he was sick of the corporate rat race and decided to become a full-time futures trader. But his education betrayed him. He’d been trained to look at past trends and historical data and make decisions based upon this information. Unfortunately, the market doesn’t look backwards; it looks forward. And that’s the hardest thing to teach people, that the market is constantly trying to price equities six months to a year in the future.

To make things worse, it’s not unusual for traders to become desperate as they begin to deeply their trading accounts and abandon the limited trading technique they learn; and problems compound and beget more problems until they no longer have a problem, they’re broke and out of the business.

It’s not necessary, and proper training will keep you in the market as long as you maintain proper trading technique and exceptional self-discipline. But the question is this:

Why do rational traders sometimes act irrationally?

One of the toughest facts to accept as a trader is that you are going to lose on some of your trades. Probability makes it infinitely clear that there is no trader who can trade with 100% accuracy. Quite simply, you’re going to lose a certain percent of trades and there is nothing you can do about it. No trading system can assure you of 100% accuracy, I don’t even know of a trading system that consistently trades with 70% accuracy. Now let me qualify that, you will see ads in the trade journals that trumpet the fact that they are trading at an 80% profit rate. Don’t believe it.If a trader that assist them performing at 80% efficiency he most certainly would not be advertising it for sale.

The point is a simple one, and has been my focus for the last couple weeks. I want to trained novice traders in a system that will help them succeed in the early parts of their trading career. I have worked diligently to set up a system that will accomplish just this goal. I will be posting links to the system in the coming weeks and I encourage you to take advantage of the system, as there is no better lifestyle than trading for a living, especially when you are trading profitably.

Should You Trade Futures Contracts Instead of Stocks?

By trader7757, 24 January, 2010, No Comment

Leverage in futures contracts can be a very useful tool to increase your account balance, and your potential to make money is far greater in a futures account than day trading a stock account. But managing a futures account takes a high degree of skill and self discipline.

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How Really Useful Are Fibonacci Retracements

By trader7757, 22 January, 2010, No Comment

So there you have it, the reason the Fibonacci ratios work is unclear, and I am unwilling to bestow mythic credibility based on the history of the ratio. On the other hand, there is no denying the market pays attention to these numbers. Whether I believe they are a self-fulfilling prophecy is irrelevant, because as traders we only deal in profitable trades and growing account balances. The “why” just doesn’t matter

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Day Trading the ES Emini: Contract Considerations

By trader7757, 16 January, 2010, No Comment

Contract Considerations fοr Day Trading tһе ES Emini

It garners more trading volume tһаח аחу emini contract οח tһе Chicago Mercantile Exchange, аחԁ һаѕ rυח away (іח trading volume) frοm аחу οtһеr futures contract currently traded.  It tһе pint sized version οf tһе S аחԁ P contract tһаt traders һаνе flocked tο іח recent years.  Better уеt, іt іѕ specifically designed аחԁ priced fοr tһе individual trader.  Wһаt’s חοt tο Ɩіkе?

I spend a decent amount οf time іח trade rooms, helping novice day traders develop tһеіr trading style.  One thing I һаνе noticed, especially аmοחɡ tһе novice day traders, іѕ tһеіr lack οf awareness οf exactly wһаt tһеу аrе trading.  Sο I рƖοttіחɡ I wουƖԁ write аח article tһаt gives tһе very basics οf tһе ES contract.

Wһаt іѕ tһе S аחԁ P 500?  Yου wουƖԁ bе surprised аt һοw many traders саח’t definitively аחѕwеr tһіѕ qυеѕtіοח.  Tһе S аחԁ P 500 іѕ a capitalization-weighted index οf tһе 500 Ɩаrɡеѕt, publicly traded, large-cap stocks іח tһе United States.  Tһе index һаѕ bееח around ѕіחсе 1957.  Tһе index іѕ calculated аחԁ published bу Ordinary аחԁ Poor’s, hence tһе S аחԁ P іח tһе title.  Incidentally, tһе index reached іt’s highest point іח Development, 2000 аt 1552.87.  Iח 2010, іt wаѕ trading іח tһе 1100 range, a far wеер frοm іt’s apex.

Tһе ES emini contract wаѕ established οח Sept. 9, 1997, аחԁ һаѕ grown steadily ѕіחсе tһаt date.  Sοmе specifics οח tһе contract аrе:

1.  Tһе contract months fοr tһе ES аrе
a.  Development         =H
b.  June            =M
c.  September  = U
d.  December   = Z

Notice tһе contract months аrе designated bу letters, аחԁ tһе contract designation іѕ calculated bу combining tһе letters wіtһ tһе ES designation, tһе month, аחԁ finally tһе last number οf tһе year.  Fοr example, ESM0= tһе ES contract fοr June іח 2010.  Once уου trade tһе ES fοr a period οf time tһіѕ nomenclature becomes second nature.

Many һаνе bееח confused bу tһе pricing model used fοr tһе ES contract.  It іѕ positively simple.  Tһе ES emini іѕ one fifth tһе regard οf tһе traditional S аחԁ P contract, ѕο each point іѕ worth $50 dollars, аѕ oppose tο $250 per point οח tһе һυɡе contract.  Each point іѕ divided іחtο ticks οr one fourth point, οr $12.50 per tick.  Sο, 4 ticks аt $12.50= $50.

Tһе contract expires аt 8:30 a.m. οח tһе third Friday οf contract month. (Development, June, Sept. Dec.)  It іѕ positively normal fοr traders tο һаνе abandoned trading tһе contract аbουt two weeks before tһе expiration.  Mοѕt futures brokerages  broadcast tһе date οf switch over tο tһеіr clients, ѕο tһеrе іѕ generally חοt tһе confusion tһаt уου mіɡһt expect аt contract expiration.  If уου аrе a day trader, іt іѕ imperative tһаt уου switch tο tһе חеw contract prior (preferably tһе above mentioned two weeks) аחԁ חοt trade tһе ES emini rіɡһt up tο expiration.  Mοѕt οf tһе volume evaporates frοm tһе contract οח tһе switch date, аחԁ уου сουƖԁ rυח іחtο having mаkе ехсеƖƖеחt delivery οf tһе full delivery requirement οf tһе contract.

Tһе clear advantage οf tһе ES emini contract іѕ tһе tremendous liquidity, аחԁ thus уου ѕһουƖԁ never see slippage аѕ a result οf tһе contract trading thin.  More tһаח a million contracts аrе traded οח аח average day, wһісһ іѕ astounding volume wһеח taken against ѕοmе οf tһе thinner emini contracts offered.

Tһе ES emini contract οח tһе Chicago Mercantile Exchange, wһісһ һаѕ bееח a rіɡһt innovator іח tһе emini arena.  Tһе CME Globex іѕ tһе actual home οf tһе contract, аחԁ іt trades during regular trading hours, takes a small brеаk, аחԁ tһеח trades аƖƖ nighttime until tһе opening οf tһе next days cycle.  Tһе actual hours οf trading аrе:

Monday-Thurs  5:00 p.m.-3:15 p.m. & 3:30 p.m.-4:30 p.m.
Sunday              5:00 p.m.-3:15 p.m.

Margins requirements vary bу firm аחԁ whether уου аrе trading intraday οr holding contracts overnight.  Fοr inraday traders, уου саח find margin requirements аѕ low аѕ $400/contract аחԁ аѕ high аѕ $3000/contract.  Of way, tһе lower contract margin requirement mау tempt ѕοmе traders іחtο over trading tһеіr futures account, аחԁ tһіѕ саח bе a real problem.  Iח аחу event, tһе contract margin requirements vary momentously.

Aѕ уου саח see, tһе ES emini contract іѕ a versatile аחԁ well Ɩονеԁ equity trading instrument.  Wе һаνе reviewed tһе monetary basis fοr tһе contract, аѕ well аѕ tһе calender specifics fοr trading.  Wе һаνе pointed out tһе margin requirements аחԁ trading hours, now аƖƖ tһаt іѕ left іѕ fοr уου tο exact уουr trading style аחԁ delight іח trading tһіѕ flat-out-fun trading instrument.

ES Emini Trading: Why Not You

By trader7757, 4 January, 2010, No Comment

The newspaper have for years written enumerable article about stocks busts, market crashes and the economic calamities that face stock investors.  It makes good news, and adds to the negative image of investing in equities and the market in general.

But those calamities are problems that face long term investors.  You know, the buy and hold guys.   For years, the general line of thinking was to buy a stock and hold onto for years and reap the rewards in your retirement years.  Of course, the dynamic nature of the stock has, to a certain extent, changed that line of thinking.

Of course, there are still the hordes of mutual fund holders who have invested untold billions in these investment vehicles.  I have a low opinion of mutual funds, as an investor cannot exit a fund until the end of the day.  Additionally, very few fund managers even come close to matching the indexes they are supposed to be imitating.  Why pay exorbitant fees for substandard performance?  I will never understand it, but there are trillions of dollars still invested in these investment vehicles.

However, recent changes in investment structuring from the Chicago Mercantile Exchange has made investment for primary income a very attainable goal.  Several product lines are aimed directly at the consumer market and priced well within the average budget.   The are called e-mini’s and are investments that are traded during the day, and seldom held overnight.  No worrying about the stock market here, you are in complete control of your investment future.

I don’t want to give you the impression that these investment are like ATM machines that simply spit out money all day, but with proper training and practice a trader can easily earn $500 a day or more and not hold any positions over night.  Of course, most individuals have never given serious consideration to investing in the markets, which many consider relegated to Wall Street experts.  But nothing could be farther from the truth.

There are many courses, some home study, that are reasonably priced that will give you more than the pre-requisite knowledge you need to be an effective trader.  Thousands of people, from housewives to businessman, have turned to trading and greatly increased their income and improved their lifestyle.

The secret is training.  It is very important that a trader spends time learning the slightly illogical movements of the market.  Again, with proper knowledge this illogical movement becomes second nature to understand.

The benefits to trading for a living are many fold:

1.  More time with your family and children.
2.  No more boss, your self-discipline is the key to success.
3.  Time for leisure activities and enjoying the fine things in life.
4.  You control your income.  You have the skill to make money, and nobody can take that away from you, fire you, or change your job.  More than anything, once you learn to trade, you can become completely in control of your lifestyle.
So, I propose that you consider exploring the benefits of trading and see if it suits you.  It’s not for everyone, but it’s wonderful for a lot more people, especially if they have the knowledge of what is possible in trading right from your home.  You are your own boss, and master of you own lifestyle.  No more corporate mentality to deal with.

ES Emini Day Trading: Eight Habits of Successful Trading Scalpers

By trader7757, 19 December, 2009, No Comment

ES Emini Day Trading:  Eight Habits of Successful Trading Scalpers

Not everyone day trades in the same manner, but successful scalpers tend to share some similar characteristics.  Over the years, I have noticed that:

1.  A good scalper is familiar with the contract he is trading.  He has extensive experience trading the contract, and most scalpers will tell you that every futures contract has it’s own idiosyncracies that make it unique.  Trading a contract you are unfamiliar with can be fun, if you are trading low contract numbers and trying to learn, but it is a tough place to try and make money.

2.  A good scalper is in complete control of his trading account.  He does not overtrade or trade more contracts than his pre-set risk tolerance.  There is often a tendency among less talented scalpers to start trading larger contract amounts if they find themselves having a bad day.  A good scalper does not try to over compensate and stays within the parameters he lives by in his trading life.  Doubling down is not a good way to make up for successive losing trades.

3.  A good scalper is self-disciplined and stays within himself.  He has a system and his goal is to execute his system flawlessly.  He does not take on a risky trade that is not within the parameters of his entries, and he does not bail out of a trade that is still within his parameters if he starts feeling bad about the trade.  The ability to stay under control during difficult trading times is the hallmark of a great scalper.

4.  A good scalper has a solid understanding of his own ability.  Some markets are very difficult to trade, especially when the price action is whipshawing back and forth and there is no clear trend.  There are risky techniques to trade these markets, but they involve considerable risk which is probably outside the risk parameters of the scalpers.   Trading is not like Texas Hold ‘Em, you never go all in, and you never bluff.

5.  A good scalper realizes that the market is always right and he is always wrong.  This is a tough one to swallow, but when I make a losing trade, even though the set up was just exactly what I was looking for and the price started moving in the expected direction, then turns south and I get stop out, I am wrong.  The market is a constant, so it is always right.  It may not always be logical, but it is the ultimate decider of trading truth.

6.  A good scalper keeps track of his trading.  Most good scalpers keep a trading diary and perhaps even the daily chart for every day they trade.  I frequently go back six months and look at the things I did well and some of the things I did poorly.  It is part of the method of learning to trade to keep track of where you have been and revisit that place from time to time.  You don’t live in the past or dwell on your mistakes, you learn from your mistakes.

7.  A good scalper controls all the outside variables in his trading environment.  Many traders listen to music while they trade, some prefer silence, but very few listen to the trendy market television shows that blare out all sorts of speculation and rumor.  Scalpers trade the chart in front of them, and that chart contains all the information they need.  There is no need for some television talking head to skew your thinking, and it can happen.  The trading atmosphere should be away from the family, tv, radio anything that can distract, and the family should understand that while dad is trading he should be left to trade.

8.  And finally, a good trader has a healthy perspective on life.  He understands that as a scalper he does not have to worry about the broader trends effecting the economy or the world, at least from a trading standpoint.   He knows that all the information he needs is right there in the price action and indicators he has come to rely upon, and he trust his system to serve him well.  Trading isn’t everything in his life, but it is his income.  But trading gives him the time to spend with his children and family, his leisure time is enhanced, and he has a chance to make the world a better place instead of working long hours in the corporate life.

I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit.

I endorse a state of the art trading program for beginners at Trading Concepts, Inc It’s an awesome product that will have you well on your way to success. Plus, it has a money back guarantee…you have nothing to lose and thousands to gain.

ES Emini Day Trading: More on Decision Bar Trading

By trader7757, 14 November, 2009, No Comment

I field several requests for information on DecisionBar every week.  For ES Emini day trading, it seems people are looking for that magic bullet that puts them over the top.   Trade setups are evaluated through a filtering process, which is to say that a numbers of indicators are used to select a profitable trade.

When I see a trade setup in the offing, I consciously try to find reasons not to take the ES Emini trade.  That sounds a little counter-intuitive, doesn’t it?

Not really.

One of the biggest mistakes a trader can subject himself/herself to is chasing the price action.  We have all done it, usually with disastrous results, and I consciously try to fashion a trading image of myself as a cautious trader.  Not scared, but cautious.  This may be a blow to the ego of some traders, but futures trading is no place for an ego.

Decision Bar makes a fine filtering device, and has kept me out of some ruinous trades.  It is also a great indicator for breakouts and breakdowns.  Of course, it is not hard to spot a breakdown or breakout, but when you combine the DecisionBar oscillator with the DecisionBar indicator, you find yourself will a lot of information at your fingertips.  Filter, filter, filter.

So I use DecisionBar as one of my primary filtering devices when trading.  I have found the price exhaustion signals on DecisionBar to be unreliable.  This, of course, my be a function of my reluctance to enter counter trend trades, especially when the price action is significantly above or below the 89 period SMA.  I should point out that less than four or five points on the ES Emini does not necessarily exclude a trade, but it does cause a red flag.  I want to trade with the trend and not try to make a living discerning when the market is going to change direction.

The DecisionBar manual even points out some great filtering devices to use when trading the ES Emini and use the Decision Bar program as your primary indicator.  Judging from the reviews by traders on chat boards, it is obvious that most have not taken the time to completely familiarize themselves with the manual provided.  Additionally, there is an easily accessed page on the Decision Bar site called Decision Bar hints, and this resource should be read, too.  There is a wealth of information available on Decision Bar, and once a trader learns the program, there is no reason to complain about using the program profitably.

Finally, there is some concern about the quality of customer service Decision Bar provides.  This is not my experience.  If you call customer service with a trading problem, there is a good chance you will be asked to read the manual.  However, if you have some technical issues, there is no doubt in my mind that you will find the service just fine.

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