Archive for the ‘Stock Market’ Category

Summary of Trading for Week of October 4

It was another week of unusual market moves and prolonged periods of price stagnation. As I have been saying for quite some time, the recovery from our current recession will be typified by a “mixed bag” of economic reports. Of course, this week was no exception, though the market chose to react to various reports in unusual fashion.

Friday was probably the most baffling day this week. Most economists expected the economy to add 8000 new jobs, but ADP reported that the economy actually shed 95,000 jobs. As you can see, the experts missed this particular prediction by nearly 100,000 jobs. You would expect the market to react negatively to this sort of news because employment has become a very hot topic of late, but the market chose to march merrily along its way and posted a healthy gain for the day. There are several technical factors that contributed to this gain, but it was by and large a confusing reaction to very bad news.

This sort of market action was the norm for the week, though we did experience some prolonged periods of market stagnation. Of course, this doesn’t surprise me. Since the futures market is based upon broad stock market indices, the market needs smaller investors to reenter the market and purchase stocks. I would be hard-pressed to come up with a rationale for anyone to initiate a long position in the current economic climate. To say the least, the potential for sizable gains in the market are less than compelling; on the other hand, it would not be difficult to envision a sharp correction from current index prices.

It is my opinion that the majority of market participants are traders, not investors. While traders provide an essential function in the market, the market requires smaller investors investing on a fundamental basis. Yet, the fundamentals for our current market condition are shaky and there are many pressing questions about our economy. The dollar has been weak; volume on the ES e-mini contract has been, at times, light and erratic.

To compound the current economic woes, a cottage industry in disseminating bad economic news has kicked into high gear. This is not an unusual phenomenon during recessionary periods. Quite simply, bad news sells. Of special note are the gold bugs, who come out of the woodwork during every recession and tout the benefits of owning hard assets like gold. I feel that some exposure to gold is essential for most individual investor’s portfolios; but dumping your life savings into gold is not a wise idea. There can be no disputing, though, that gold has enjoyed a very profitable run in recent years, and has outperformed the stock market of late by a considerable margin. But my point is a simple one: buying massive amounts of gold is simply not the answer to our current economic recession.

We were able to trade very effectively this week though, as numerous opportunities for high probability setups were the norm. Generally speaking, we earned between $200 and $400 most days this week. Friday was the exception, though; as the market was particularly flat and we managed only a small gain of $100. Fortunately, we had no losing days this particular week.

The E-Mini Trading Professor System trading room enjoyed a wide variety of visitors and the conversation was brisk and interesting. Lots of new faces, and more new long-term customers joined than usual. As a trader, I feel like traditional investors are currently looking for alternatives for making money in ways that are untraditional, especially participants who have typically invested solely in the stock market.

Looking ahead, next week would appear to be a reasonably volatile week as there are a plethora of importance and pertinent fed and fed agency announcements that the market will have to digest. All in all, it should make for an interesting and profitable week of trading.

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Ten Rules for E-mini Day Trader Longevity

This list is for traders but also applies to investors.

1. Recognize mental blocks. If you believe that the financial markets are rigged, stay away. Bias is blinding. If your ego requires constant feeding and vindication, do not trade. If being right is more important than making money, steer clear of the stock market. If you must be dogmatic, direct your energy into following these rules.

2. There is no needle in the haystack. There’s no reliable way of picking a single winner from the thousands of stocks listed on the exchanges.

3. Resist betting it all on the longshot because the outcome is based purely on luck. Dr. Ziemba explains the mathematics of horse racing. The point is that the bettor is better off with horses that finish the race “in the money”. They don’t have to come in first.

4. Diversify. Spread your bets around. It’s the only way to be on board the winner.

5. Trade small. Bet only a small fraction of your equity on each position. You must take risk to get reward, but ruin is certain if you take insane risk. It’s defined in Fortune’s Formula. Think Adventures in Conditional Probability.

6. Press the winners. You must compound a winning streak.

7. Never throw in good money after bad. Never double down. Ever.

8. Do not rationalize. Down is NOT up. Red is NOT the new black. If the account equity is shrinking, your bets are in the wrong direction.

9. Establish a stop loss. Place it in the appropriate location (except just above the swing high or under the swing low where everyone else put theirs), a place where you can be statistically confident that the move in the present direction is over. Don’t use a tight stop for lack of equity. The market doesn’t care about how much is in your account, so trade a smaller position size and put the stop in the proper place.

10. Use the stop loss. Just do it. Immediately. No excuses. Having a “mental” stop loss is the same as lying. There’s no point, because the longer you let it slide, the deeper the doo-doo.

*Observe Rule Nine. Always. Don’t go to the bathroom without it.

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    My E-mini Trading Stops Strategy

    Many traders have their own theory on how to place stops on their e-mini market orders, or whatever kind of order they place. Frankly, I insist that e-mini day traders place their stops in a manner that gives them adequate protection. My stop ranges are anywhere from 12 to 20 ticks, depending upon the nature of the market that day.

    But I want to address those who day trade without stops and indicate what a terrible risk they are taking because a sudden spike could signal the end of your e-mini day trading career. Stops are an important and essential part of any e-mini trading strategy to keep from encountering catastrophic losses.

    I also move my stops when a trade is in progross….let’s assume that I have made a good trade and am in the money and I have initially positioned my stop at 12 ticks…once I am 1.5 points into the money, I manually move my stop up to 4 ticks…once I have reached two points, my stops are at my market entry points, and if I let the trade run I continue moving my stops upward to protect my gain. Remember this…..NEVER LET A WINNING TRADE BECOME A LOSING TRADE…and stops are a great way to do this.

    You may choose to use a trailing stop strategy, where once you reach a certain point in profit the stop moves automatically according to a preset you put in before the trade gooes in. I prefer moving my stops manually, which may be the remnant of the “old school” way of doing things, but I feel much more comfortable placing my stops this way.

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      Chaos Theory, Fractals and E-mini Day Trading

      It is fitting that chaos theory got its start in the humble, but frustrating, field of meteorology. Why does it seem impossible for all our hot-shot meteorologists, armed as they are with ever more efficient computers and ever greater masses of data, to predict the weather?

      Two decades ago, Edward Lorenz, a meteorologist at MIT stumbled onto chaos theory by making the discovery that ever so tiny changes in climate could bring about enormous and volatile changes in weather. Calling it the Butterfly Effect, he pointed out that if a butterfly flapped its wings in Brazil, it could well produce a tornado in Texas.

      Since then, the discovery that small, unpredictable causes could have dramatic and turbulent effects has been expanded into other, seemingly unconnected, realms of science.

      The conclusion, for the weather and for many other aspects of the world, is that the weather, in principle, cannot be predicted successfully, no matter how much data is accumulated for our computers. This is not really “chaos” since the Butterfly Effect does have its own causal patterns, albeit very complex. (Many of these causal patterns follow what is known as “Feigenbaum’s Number.”)

      But even if these patterns become known, who in the world can predict the arrival of a flapping butterfly?

      The e-mini stock markets are said to be nonlinear, dynamic systems. Chaos theory is the mathematics of studying such nonlinear, dynamic systems. Does this mean that chaoticians can predict when e-mini stocks will rise and fall? Not quite; however, chaoticians have determined that the market prices are highly random, but with a trend. The stock market is accepted as a self-similar system in the sense that the individual parts are related to the whole. Another self-similar system in the area of mathematics are fractals. Could the e-mini stock market be associated with a fractal? Why not? In the market price action, if one looks at the market monthly, weekly, daily, and intra day bar charts, the structure has a similar appearance. However, just like a fractal, the stock market has sensitive dependence on initial conditions. This factor is what makes dynamic market systems so difficult to predict. Because we cannot accurately describe the current situation with the detail necessary, we cannot accurately predict the state of the system at a future time. Stock market success can be predicted by chaoticians.

      Manus J. Donahue III
      An Introduction to Chaos Theory and Fractal Geometry

      The upshot of chaos theory is not that the real world is chaotic or in principle unpredictable or undetermined, but that in practice much of it is unpredictable. And in particular that mathematical tools such as the calculus, which assumes smooth surfaces and infinitesimally small steps, is deeply flawed in dealing with much of the real world. (Thus, Benoit Mandelbroit’s “fractals” indicate that smooth curves are inappropriate and misleading for modeling coastlines or geographic surfaces.)

      Chaos theory is even more challenging when applied to human events such as the workings of the stock market. Here the chaos theorists have directly challenged orthodox neoclassical theory of the stock market, which assumes that the expectations of the market are “rational,” that is, are omniscient about the future. If all stock or commodity market prices perfectly discount and incorporate perfect knowledge of the future, then the patterns of stock market prices must be purely accidental, meaningless, and random (“random walk”), since all the underlying basic knowledge is already known and incorporated into the price.

      The absurdity of believing that the market is omniscient about the future, or that it has perfect knowledge of all “probability distributions” of the future, is matched by the equal folly of assuming that all happenings on the real stock market are “random,” that is, that no one stock price is related to any other price, past or future. And yet a crucial fact of human history is that all historical events are interconnected, that cause and effect patterns permeate human events, that very little is homogeneous, and that nothing is random.

      With their enormous prestige, the chaos theorists have done important work in denouncing these assumptions, and in rebuking any attempt to abstract statistically from the actual concrete events of the real world. Thus, the chaos theorists are opposed to the common statistical technique of “smoothing out” the data by taking twelve-month moving averages of monthly data-whether of prices, production, or employment. In attempting to eliminate jagged “random elements” and separate them out from alleged underlying patterns, orthodox statisticians have been unwittingly getting rid of the very real-world data that need to be examined.

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        Some E-mini Day Trading Rules . . .

        I am a scalper, so I am not terribly interested in long term trends, Elliot Wave theory or any e-mini day trading technique that requires me to think ahead much more than one half day. That is to say that I am trying to carve out 2 pts. or more out of intraday  directional movement. I truly believe that the e-mini market is random, so when I use the word “trend” I am not using in the sense that a technical trader would. The truth is, I use the “trend” for lack of a better word to describe intraday directional movement.
        Since the market moves in many random ways, my day trading method only seeks to take advantage of a tendency for people “hop on the bandwagon”. People will generally watch the market and jump into a trade when they see it heading one way or the other, and they generally stay in the trade too long. People tend develop strong emotional ties to a trade they make. They get into the mindset that the market “ought” to do something based upon some information they have gleaned, or some event that has occurred or is occurring. From the onset, let me say that the market does not “have” to do anything and freeing yourself from this mindset will greatly improve your e-mini day trading. The markets are not rational, and you will drive yourself crazy trying to rationalize the movement you see unfolding on your chart.
        Since I believe that the market moves randomly via fractals, or fractal movement, I do not believe that identifiable patterns form. This always gets my technically oriented friends in a ruffle, and I am often cursed for this belief. An overwhelming amount of evidence has been collected by academics to prove that the market is random that it is difficult for me to fathom that some people trade with chart patterns. By chart patterns I am talking about the species of technical formations typified by “head and shoulders patterns, pennants, double tops, double bottoms, etc” In short, I do not use any chart patterns in my day trading.
        On the other end of the spectrum, I do not have any use for fundamental trading either. For scalping, it should be self evident that we do not use fundamental principles. If they actually worked, most fundamentals take at an intermediate period of time to develop. My trades are anywhere from 1 minute to 30 minutes….I have been in very few e-mini trades longer than thirty minutes. But I’ll go a step further on this topic and offend all the disciples of Ben Graham and Modern Portfolio Theory….I think it’s about as valid to use as chart formations. Note to self: Is the screaming and yelling I am hearing from the back of the room? Are they throwing things at me yet?
        My thesis for rejecting Modern Portfolio Theory is really simple: just because a company is well run, has products of high quality, and a healthy cash flow does not mean that the stock price will go up… There was a company that was doing everything right but the stock price stayed pegged at around $20 for years, and there are countless examples of this being true. So I don’t use P/E ratios, beta coefficients, alpha coefficients and all the other investment terms that go hand in hand with this style of investing.
        No, what I like are little spurts of unpredictable momentum. Other than fractal theory, there is no viable explanation for the gentle (and sometimes violent) rocking pattern that is part of every chart. Of course, the problem has always been ascertaining when these little bursts of momentum take place. How can you time your entry and exit points to take advantage of rocking (or swaying) that is on every chart? How do you know which sway is going to be 5 pts and which one will be a sideways move?
        I have taken the liberty of drawing a dark line so you can see the swaying action in the market, and you will notice that some market moves are very short and some are very long. How do we get into the market for the long moves, and stay out of the short moves?
        So… that I have offended every modern day investment theory out there…lets talk some about what I DO…INSTEAD OF DWELLING ON WHAT I DON’T DO.
        There are many things I keep in mind when I day trade, but I have 4 rules that I never deviate from. Some of these rules were hammered into my head by my mentor nearly 20 years ago, others were learned the hard way- through experience.
        1. Never e-mini day trade without stops in place. I can’t imagine a day trader trading without a stop order in place, and am amazed when I talk with other traders at how many trade without placing stops. I suppose you might try to justify trading without stops by saying that you are sitting right there at the computer and will be able to trade out of any position before you can get in trouble. This is not true….without stops you have no way to account for the lightening fast moves that can come about from catastrophic news…The ES contract moved 71 pts in one 1 minute bar after one of the last rate cut announcements. Granted, you can have a move gap through one of your stops, but this is so rare as to have only happened to me once. Even on the 71 point move I was able to exit with a stop executed. Without stops you are taking excessive risk. Also, the stop is also a mental stop. As I have said, traders can become emotionally attached to their positions and the stop serves to remind them that they are getting out of the market whether they like it or not.
        2. Never let a winning e-mini trade become a losing e-mini trade…this is one of the most difficult things to learn. When do you pull the trigger to exit? Of course, there are many oscillators that can give you a pretty good idea when the trade is over….but I have watched trader after trader get 3 points up and become convinced that market is going through the roof. It seldom does, and what generally happens is the trader rides the trade right back down to breakeven or a losing position. We will talk at length about how to avoid this….but exit strategy is seldom easy. And for those of you wondering, I can’t stand trailing stops.
        3. Avoid e-mini day trading against the trend…but if you must, cut the number of contracts you normally trade in half. I chant “the
        trend is my friend” twenty times before going to bed every night. And I still make bad trades, almost always against the trend. How do you know what the intermediate and short term trends are? I make it easy, I chart an 89 period Simple Moving Average and when the price is above the moving average I concentrate on long trades, and conversely, when it is below the 89 period average I concentrate on short trades…this silly little rule will save you money.
        4. Be on the right side of the e-mini trade…have you ever done this? You have considered a trade carefully after watching it set up exactly the way you dream of. Everything is perfect, except the trade skitters sharply the wrong way when you execute. Most traders will watch the price crash into their stops and chalk it up to experience. You don’t have to be stopped out on every losing trade. If the darn thing looks like a dog out of the gate, and your oscillators even confirm this, get out….I’ll say it again, you don’t have to ride every e-mini trade into your stops. It takes a tremendous amount of ego reduction to do this….you have to admit to yourself that you were dead wrong from the onset and take a smaller loss than hitting your stops. It not as easy as it sounds.

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        E-mini Day Trading Chaos

        Fundamental e-mini day traders have no extra time for the technical traders, and technical traders battle with the Efficient Market rabble, who constitute the vast majority of market theoreticians, for coherent interpretation of the unruly and unpredictable beast we refer to as “the market”. Of course, reams of academically-sound market studies proclaim the inherent correctness of the Efficient Market Theory. Why…no less than the eminent Dr. Burton Malkiel trumpets the sheer futility in considering anything short of Efficient Market Theory. No, one cannot argue with facts laid bare in slick PowerPoint presentations with glossy charts and multi-colored tables, that’s for sure, and yet there is something missing, something so essentially important that no theorist dare utter the words…equity market theory seldom translates into profitable trading.
        And that’s a real problem for me. If an e-mini stock market theory is irrefutably true on paper it ought to have some phenomenal performance in practice. Of course, this is seldom the case.
        For those who might have missed it, we’ve put a team of astronauts on the moon. We have unravelled the the vagaries of the quantum mechanics with startling accuracy, and teased the destructive power of atomic structure to produce enough nuclear weapons to obliterate ourselves tenfold. Why, we have even sequenced the double helix structure of of our own DNA
        molecule. We are talking about the very building block upon which life is based, a structure so complex that literally billions, not millions, but billions of gene strands comprise it’s makeup.
        But we have failed miserably at predicting where the market is going to move at a given point in time.
        Yet we argue on as to who is right and who is wrong. It seems to me that I learned in my college Argumentation class that something true at face value, and provide proofs to that end, before you can argue your point. So it would seem a bit imprudent to argue about which theory holds true when we have proven to ourselves, over and over, that no theory has predicted, with any accuracy, where the market is going to be at a given point in time.
        My one-watt brain cell demands that a FACT has to hold up time after time to be true. One cannot argue the untrue into truth. For example, these are facts:
        1+1=2 (unless you’ve digested Liebnitz’s arguments)
        The moon revolves around the earth in a given arc and is not made out of cheese.
        We will all die.
        I think you get my point here. It is impossible to argue untruth into truth through a sheer volume of words. So I’ve managed in 21 years of trading at the institutional and retail level to establish only one irrefutable FACT:
        We have an incomplete knowledge base about the market and there is not a method to predict, with 100% accuracy, what the market is going to be valued at a given point in time.
        Which leaves me out there with the lunatic fringe scratching my head in bewilderment. Yet I am a consistently profitable trader. I live in the very uncertain world of fractals, strange attractors and chaos theory. Yes, you heard me say it….CHAOS THEORY.
        The real problem with all market theories, in my opinion. is that they are linear in nature. Of course, even a cursory observation of any equity chart exposes the distinct non-linear pattern typical of the equity markets. It is not possible to predict even from bar to bar where he market is headed. No, a binary outcome is after each bar is the best you can hope for. That is to say there is a probability from bar to bar whether the market will go up or down or stay the same. And when trading, probabilities are the best we can hope for…and careful observation of market fractal mini-structures can be teased from the charts. Which is not to say that fractal structures are the Holy Grail in trading, but they are reliable predictors in non-dynamic markets….that is, markets unaffected by catastrophic or peculiar outside occurrences.
        Of course, this type of thinking turns the world inside out….after all, we linear thinkers and are programmed to see patterns in the world and formulate patterns based upon observation. I am 5’7″ and weight 210 pounds and have gray hair. My boss is also 5’7″ and weighs 210 pounds, and yes…he has gray hair. So it stands to reason that 5’7″ and 210 pound men must all have gray hair. Of course, that is a simplistic view of our linear thinking process, but it serves it’s purpose well enough…and that is correlating variables of an infinite set is, at best, a dicey endeavor.
        No, I’ve learned that the secret to the market lies in thinking in a non-linear fashion, and blocking out what seem to be obvious correlations. There are no obvious correlations in a non linear world….only fractals. Are you with me?

        Bulls, Bears, E-minis, and Other Stock Market Nonsense

        There is a tendency to believe, even among investment professionals, that once the e-mini market starts to go up the “good times” have arrived and the market is going to go up forever. Conversely, the is also a tendency to believe, even among investment professionals, that once the market starts to go down, or correct, “the sky is falling” and the market will continue fall ad infinity. Like members of a devoted political parties the “up” crowd, or “bulls” feel comfortable when the market is going up and they are in control. I think it is also important to note that since or economy is almost universally expanding because our population is increasing, which in turn causes of GDP to increase.

        But our markets tend to over expand, and the over expansion is followed by corresponding contraction…and this contraction is when the “sky is falling crowd.” the “bears” have their day in the sun. Many investors tend to be either bulls or bears, and strongly identify with the market either going up or the market going down.

        Of course, an e-mini day trader doesn’t affiliate himself with any “political investing party.” Bulls, bears….these are wonderful basketball and football teams but are of little consequence for a trader. We are happy to go long or short at the appropriate times without conscience or investing preference. Like most traders chaotic investment philosophy goes to where the money is…long or short and where the money is.

        I started out as a stock and bond man….but concentrate entirely on index futures contracts now. Of course, my trainers and the media in general portrayed the futures and options markets as “voo-doo” markets and not to be taken seriously. No, I was trained to believe that the only investing occurred on the NYSE and NASDAQ. (and the NASDAQ was barely respectable back then) I did trade some TED Spreads (Treasury-Eurodollar) but nothing like the scalping style I employ now.

        The reason for my conversion is much the same as the reasons other traders….we have nano-second access to any market through home computers, and as home computers have proliferated so has the number of firms that cater to home traders or small office traders. While I hate to admit it, my investing career has taken me all the way back to Quotron.

        My early investing career was very much influenced by the writings of Benjamin Graham, and Graham and Dodds writings were very much the gold standard by which other authors were judged. Value investing, as was Grahams preference, along with detailed study of balance sheets and cash flow statements were the rage, along with neighborhood investment clubs. The world has certainly changed.

        ES E-mini Day Trading: Why Not You?

        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 day trading is like an ATM machine that simply spits out money all day, but with proper training and practice a day 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 day trader.  Thousands of people, from housewives to businessman, have turned to day trading and greatly increased their income and improved their lifestyle.

        The secret is training.  It is very important that a day 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 e-mini day 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 e-mini day 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.

        Do You Over Trade the ES E-mini?

        One common characteristic of ineffective e-mini day traders is the execution of too many trades throughout the course of a ES e-mini trading session.  There are many causes for this phenomena, but if you are making 15 trades a day you are probably guilty of this offense.  In my world, there are not 15 excellent trade set ups on the average e-mini trading day.

        Over trading during a trading session will eat away at your profits or enhance your losses.  On the other hand, your futures broker will love you because his commission account will soar, but I don’t think your futures account will withstand the commission shock.

        As I see the market begin to form a good set-up, I start an argument with myself.  I usually look for reasons not to take the trade.  Is the set up really a good one?  Do some of the oscillators or price action appear to be pointing to avoiding the trade?  Am I trading on intellect and not emotion?  These are all questions I ask myself as I prepare to enter a trade.

        I think the cause for over trading has its roots in emotion, specifically greed.  After all, every trade has a binary outcome and the possibility to make money, and making money is the reason most of us trade the ES emini contract.  You make money on high probability trades, though, not trades with shaky set up probabilities.  I like to fish, for example, and the only way to catch a fish is to have your line in the water.  You won’t catch that nice fat walleye if your line is in the boat.  I think this analogy is a good one for trading, too.   Many people feel the like they need to maintain active positions in the market in order to catch the next “big move.”

        One clarification here:  I am a scalper, which is a technique for carving out 2-3 potential points per trade during the normal market action I observe.   Which is to say I look to make 4-6 trades a day to achieve my profit target.  My average trade lasts 5 to 10 minutes and then I take my profit, or cut my loss.  Now there are times when the market gets into a nice trend and I may sit in a trade for quite some time, but that is not the rule, rather it is the exception. (a very pleasing exception, at that)

        My point is a simple one, don’t over trade.  Usually you are “chasing the market” when you trade to often.  You have to tell yourself that there are times when you will miss a potential trade and err on the side of safety.  This is especially true of countertrend trades, which are the bane of my existence.  Countertrend trades must be scrutinized with the greatest of care because they can account for many losses. The market might well head into opposite the direction for a bar or two, only to resume the direction of the trend.  Years of heartache and cursing have hardened me against countertrend trades and I scrutinize them very closely.  You should too, the trend is your friend, and poorly thought out countertrend trading will make you old before your time.

        One last note: Highly volatile markets will appear to produce many nice setups that can’t be trusted. You will be tempted to take many trades.  When trading the ES emini contract, you should note the Average True Range, and if it is swinging in the 8 point range and looks like a seismograph in a 6.5 earthquake, you are likely to get blown out of most of your trades  by simple market noise, at those times a profitable trade is more a function of luck than skill.  Volatile markets, with the long bars and long flags which are typical of this phenomena, are good days to to err on the side of caution, as trading may be risky proposition.  You will see many nice setups, then suddenly the market may change course: it’s like surfing in 30 foot waves, your chance to get crushed are very high.  Wait for calmer waters and trade in a market where your skill level can earn you safer returns.  Best of luck trading.

        Day Trading: The Perfect Job

        Low cost of entry. Great earning potential. No selling. Work from your home… in your PJ’s if you want. Sound like a great job? There is little argument that day trading can be one of the best jobs on he planet. But you have to learn to trade and up until ten years ago the only real traders were parked behind massive computers at investment banks or worked directly on the floor of the exchanges.

        But that has all changed, and now day trading the ES Emini is within the reach of anyone with a computer. In the last 10 years, the exchanges have started developing products called “emini” contracts that are inexpensive and efficient for the small day trader to trade. With some training, it is possible to earn an impressive living trading from your home. This has created a veritable stampede of individual day traders into the markets, with mixed results.

        Mixed results? I’ve been a trader in a professional capacity for a good portion of my life and have traded at both the retail and institutional level. The markets take some specific training to master, and common sense is not a quality I would use to describe market price action. At times, the market seems to move in ways that defy logic. That is why you need specific training to learn to stay away from bad trades.

        There are many times that simply looking at the market and the price action occurring would lead you to a conclusion a certain outcome is inevitable. However, there are momentum oscillators and rate-of-change indicators that would show you that the move you are observing is simply “market noise” and not a good trading opportunity at all. You learn to look for specific set-ups that consistently produce profitable results. This skill is developed through training and experience. Still, many novice traders open a futures trading account and start trading without the proper education and the results are disastrous. It doesn’t have to be that way. You can be a very successful trader.

        Learning to trade takes a steady hand and the ability to control your emotions. That, in itself, is no small feat, but emotions (specifically greed) are one of the toughest obstacles every trader must master. We are trained to look for specific set-ups, and taking trades that do not match the criterion we are looking for spell a losing trade. It also takes a good bit of time to acclimate yourself to the constant movement in the market as traders buy and sell.

        The ES Emini contract trades well over a million contracts a day. That is a lot of traders buying and selling. Not all market price movement is indicative of a suitable entry to profit-you learn to discipline yourself to spot those specific instances when the market is primed to move in one direction and take a trade in that direction.

        What has become very interesting is the wide range of individuals who now day trade for a living. I know housewives, lawyers, a doctor… a wide range of people have found this vocation resonates with their sense of work. And it has it’s advantages, too.

        Day trading allow you to get your life back from the 9-5 grind of a regular job. I get to spend more time with my family and children, along with having time for some of the leisure pursuits I have always dreamed of doing. Trading is for everyone, but most people can be taught to trade with profitable results, and you only improve as you gain more and more experience. It doesn’t take a college degree or PHD in physics to trade, just a willingness to learn and follow specific directions. And really, is that so hard