Day Trading the E-mini Futures

[bakrob99 11]

  Predictor said:

...That means either #1 we're only 1/2 way through the decline today or #2 everyone knew Draghi wouldn't do anything or #3 the market did not rally because of his remarks but because of something else.

 

How about #4. We still have the NFP tomorrow and the larger funds are waiting for it.

[Predictor 11]

goodoboy.. I told you there was a buyer at 50. Why would you put a stop above what we believe might be the natural buyer? Did you put your stop directly below what you thought was a pivot? I've found that in many markets, we will go out, touch just below the pivot and then reverse. We seen that with the sell off earlier today.. where we touch just above a prior high.

 

I believe in this case.. the equities buy programs kicked in just above the natural buyer. Of course, these patterns don't always setup in this way...

 

  goodoboy said:

Yep, man o man. 53.50 was a bit high and should have waited a bit for retest of 51. that miss does not feel too good, came right to 1358 too.

Edited August 2, 2012 by Predictor

[DbPhoenix 42]

  goodoboy said:

Yes, I know what I mean. The risk was 2pts and the reward was potential 5pts. If my definition is wrong please correct me.

 

Actually your risk was 2.5 and your expected reward 4.5 ("long 1353.50, stop at 1351; target is 1358"). That's less than 2:1.

 

Db

[Predictor 11]

Goodoboy, I'm sure you will get a lot of opinions as everyone has on take on things. Db has his but I rarely/never measure by risk/reward or only basically. I am more concerned with the probability I will make money. I typically will use a large stop because I don't have time to think about where I should put my stop and I don't want to be distracted. I'll exit using my tape read when I feel that I'm more likely wrong then right.

 

I am also concerned with whether or not I can clear my positions. Even though I detected a seller at 52.50, I would not have taken that trade because I wasn't convinced I could clear lower.

[goodoboy 10]

  bakrob99 said:

How about #4. We still have the NFP tomorrow and the larger funds are waiting for it.

 

Are you saying the larger funds are trying to get a head start and used the comments today from get a good start?

[goodoboy 10]

  TheNegotiator said:

Indeed!!

 

Here's a chart for reference:-

 

 

Thank you kindly. The volume profile helps.

[bakrob99 11]

  goodoboy said:

Are you saying the larger funds are trying to get a head start and used the comments today from get a good start?

 

Nope. I'm saying the opposite - that they are waiting for the NFP so my expectation was that this day would not be a true trend day.

[goodoboy 10]

  DbPhoenix said:

Actually your risk was 2.5 and your expected reward 4.5 ("long 1353.50, stop at 1351; target is 1358"). That's less than 2:1.

 

Db

 

Thanks Db, its well noted. What typical risk reward do you use?

[goodoboy 10]

  Predictor said:

Goodoboy, I'm sure you will get a lot of opinions as everyone has on take on things. Db has his but I rarely/never measure by risk/reward or only basically. I am more concerned with the probability I will make money. I typically will use a large stop because I don't have time to think about where I should put my stop and I don't want to be distracted. I'll exit using my tape read when I feel that I'm more likely wrong then right.

 

I am also concerned with whether or not I can clear my positions. Even though I detected a seller at 52.50, I would not have taken that trade because I wasn't convinced I could clear lower.

 

Thanks. Yes, everyone has their own way of doing things. I like to consider risk vs reward in my trades. It gives me a better idea on what I am looking for or I am just overreacting, chasing, or being undisciplined. If I don't know my target before I take the trade, then it goes against the method I am trying to build for myself.

 

I was using 3pt stop for a long time, now I am down to 2-2.5 stop. Still debating on this and really it depends on the situation.

 

As far as the trade I took, I was looking at 1351 as support, so taking the trade at 1352-1352.50 was initially my plan, but I didn't follow my plan and took it early. If I would have followed my plan from the start, I would have executed right (IMO). Lesson Learned.

 

And yes, I remember this 1350 area sometime ago.

[goodoboy 10]

  Predictor said:

goodoboy.. I told you there was a buyer at 50. Why would you put a stop above what we believe might be the natural buyer? Did you put your stop directly below what you thought was a pivot? I've found that in many markets, we will go out, touch just below the pivot and then reverse. We seen that with the sell off earlier today.. where we touch just above a prior high.

 

I believe in this case.. the equities buy programs kicked in just above the natural buyer. Of course, these patterns don't always setup in this way...

 

Is it just me, or have anyone notice after a big down day like today, always at the end about 2:40-3:15, price action goes up.

 

Is this short covering or real buying?

[goodoboy 10]

  DionysusToast said:

btw - if anyone is interested - Jim Dalton has some good webinars on the ES here - James Dalton Webinars | J Dalton Trading

 

In particular, the following webinars are excellent:

 

The Importance of Understanding Overnight Markets for Short-term Traders

SFO Magazine Webinar: Identifying Day Timeframe Trade Opportunities

 

And they are free too!

 

Thanks, I watch webinars all the time.

[goodoboy 10]

  TheNegotiator said:

What days like today do is make good money for those with a set plan and who know what they are looking at and it runs over those who don't really know and need time to decide what to do- or are just motivated into trading against their plan because those fruit machine lights are flashing.

 

You know right, I been in days like this before, where I am just chasing all over the darn place. Afterwards, I feel all tired.

 

I think that most new traders always have this feeling they are missing something. This is why, I took time out to build me method and road map to learning and trading. I feel it will relax me. I remember my co-worker and I first started trading ES, and we was all over the place on big days like this. :rofl: By the end of the day, we both had losses. LOL

[BlueHorseshoe 10]

  goodoboy said:

Is it just me, or have anyone notice after a big down day like today, always at the end about 2:40-3:15, price action goes up.

 

Is this short covering or real buying?

 

Open Interest might give you the answer to this question, but it's not something I've ever used, so I'm unsure of the granularity of it.

 

BlueHorseshoe

[DbPhoenix 42]

  goodoboy said:

Thanks Db, its well noted. What typical risk reward do you use?

 

I don't use any, consciously, but I've been doing this a very long time. Wyckoff (who is not necessarily pertinent to this thread), however, suggested that the R:R be at least 3:1. And traders have generally adhered to this for over a hundred years. Otherwise, unless you have a very high hit rate, you will over time lose. It's simple math.

 

The R:R, however, is irrelevant unless the risk is appropriately determined and the reward is realistic. In this case, the risk was below support, not above it. By entering so late, your "reward" would have to be at 65-66, minimum. If that is not realistic, don't take the trade.

 

While some pooh-pooh the R:R, it can help beginners avoid doing stupid things. For that alone, the calculation is worth doing.

 

Db

[goodoboy 10]

  DbPhoenix said:

I don't use any, consciously, but I've been doing this a very long time. Wyckoff (who is not necessarily pertinent to this thread), however, suggested that the R:R be at least 3:1. And traders have generally adhered to this for over a hundred years. Otherwise, unless you have a very high hit rate, you will over time lose. It's simple math.

 

The R:R, however, is irrelevant unless the risk is appropriately determined and the reward is realistic. In this case, the risk was below support, not above it. By entering so late, your "reward" would have to be at 65-66, minimum. If that is not realistic, don't take the trade.

 

While some pooh-pooh the R:R, it can help beginners avoid doing stupid things. For that alone, the calculation is worth doing.

 

Db

 

Thanks Db, I like the 3:1 ratio. For my case, I have to use risk vs reward (R:R) on each trade or taking the risk is just not worth it and makes more planned.

[DbPhoenix 42]

  goodoboy said:

Thanks Db, I like the 3:1 ratio. For my case, I have to use risk vs reward (R:R) on each trade or taking the risk is just not worth it and makes more planned.

 

Understand, however, that the risk need not have anything to do with stops, and whether the stop is "large" or "small" is not pertinent. One need not use stops at all. The risk is inherent in the trade (e.g., below support) and has nothing to do with how much risk one is willing to take. It's there whether or not the trader is willing to take any at all.

 

Likewise, the reward is inherent in the price movement, and pegging a particular price level as reward just to complete the calculation is pointless. The market couldn't care less. If there's no reasonable expectation that the reward level will actually be reached, the trader is just deluding himself.

 

Db

[goodoboy 10]

  joshdance said:

I will jump on the "bash goodoboy" bandwagon (j/k goodoboy). I used to also get absolutely slaughtered on days like today. But here's what happened:

 

1) the market dropped before the open

2) the market moved up to a logical area of prior supply/resistance

3) the market sold off from there, and is near lows again

 

Structurally, days really don't get better than this. We have the 56-61 consolidation. Market broke up out of that. Showed its strength, pulled back to VWAP and top of 56-61 consolidation, and continued up. Consolidated, and fooled lots of people when it broke above yesterday's low. Double topped. Dropped, and is now channeling down.

 

So goodoboy, if today was tough--and I remember when it was hella, crazy, punch my monitor tough--it's because of something on your end, and it's not anything on your charts. You sold too early in the day because you didn't want to miss out when the market had already dropped 25 handles. Then you bought near the high (despite my warning about the 69 ) but it was still a good buy as one more retest was a reasonable probability. Fortunately for you, it sounds like you actually may have made money.

 

Negotiator mentioned earlier, and I mentioned above, the structure. But all of this is stuff that is plain to see on the chart, and you can see the same things. I think what good traders do well though, is that they know the behavior of the market they are trading, and the general psychology of the traders participating. No one wants to miss out, so many will short the open, but the market didn't really confirm a short did it? And then they get pissed off, and they jump on the long bandwagon just at the top--just look at the 10:27 volume, it's plain to see. So, fear of missing out, "what ifs", "if onlys" are all over this chart today. All we have to do is recognize that, not be one of those people, and then take advantage and we can make some money. Negotiator helped me greatly with some of this stuff, so listen to him.

 

Thank you Josh,

 

I just got some time review the charts and re-read your message. What you wrote makes sense and that type of thinking sounds like me. As analyze the chart and re-think some situations, I could have easily made some mistakes as I was in the "i miss something" mode as well. Obviously, I need more practice and study of market behavior. Today, was a good day for learning, but it was after market close!

[DionysusToast 10]

  DbPhoenix said:

Understand, however, that the risk need not have anything to do with stops, and whether the stop is "large" or "small" is not pertinent. One need not use stops at all. The risk is inherent in the trade (e.g., below support) and has nothing to do with how much risk one is willing to take. It's there whether or not the trader is willing to take any at all.

 

I don't agree that your risk is always below support in a long. You do not need any support or resistance level to play off.

 

Today, I was long just above the open. What I wanted to see going into the trade was the market stay above the open.

 

What happened was it ticked down through the open 2 ticks but the amount of contracts hitting the bid was trivial.

 

So - the price itself wasn't even important. There was a few hundred contracts 1 tick below the open and about 48 2 ticks below.

 

There's all sorts of reasons for staying in a trade but the last swing low/support on a long trade isn't the only way to play it/

 

  DbPhoenix said:

Likewise, the reward is inherent in the price movement, and pegging a particular price level as reward just to complete the calculation is pointless. The market couldn't care less. If there's no reasonable expectation that the reward level will actually be reached, the trader is just deluding himself.

 

Db

 

On entry to a trade, reward is the one element you have least control/knowledge about. Sure - you can look @ the last swing high above if you enter on a pullback or pick another level but it's an unknown. You can only control risk, reward is down to management and luck.

 

I crapped out of the last portion of my long after the 10am news, in retrospect I could have gotten a lot more out of the trade. As it is, I have no 'fixed' reward.

 

In all of my trades, I have no clue what the R:R is when I enter. I might exit a trade after 2 ticks, it just depends how the action plays out.

 

I think the importance of R:R is overstated in the retail trading world myself.

[TheNegotiator 13]

  DionysusToast said:

I don't agree that your risk is always below support in a long. You do not need any support or resistance level to play off.

 

Today, I was long just above the open. What I wanted to see going into the trade was the market stay above the open.

 

What happened was it ticked down through the open 2 ticks but the amount of contracts hitting the bid was trivial.

 

So - the price itself wasn't even important. There was a few hundred contracts 1 tick below the open and about 48 2 ticks below.

 

There's all sorts of reasons for staying in a trade but the last swing low/support on a long trade isn't the only way to play it/

 

 

 

On entry to a trade, reward is the one element you have least control/knowledge about. Sure - you can look @ the last swing high above if you enter on a pullback or pick another level but it's an unknown. You can only control risk, reward is down to management and luck.

 

I crapped out of the last portion of my long after the 10am news, in retrospect I could have gotten a lot more out of the trade. As it is, I have no 'fixed' reward.

 

In all of my trades, I have no clue what the R:R is when I enter. I might exit a trade after 2 ticks, it just depends how the action plays out.

 

I think the importance of R:R is overstated in the retail trading world myself.

 

1- Your risk is what you make it whilst you're in the trade, I agree. However, the important aspect is what the market will do relative to the market and not your trade. If your risk is max 2 pts say and you enter 2.5 pts above support (whether it be a level, ma, pp, fib, open, close or whatever you believe the market reacts to), then in many cases you're going to be exiting prematurely without giving the market a chance to reverse. If you think about it, if you didn't have a position then you might even be looking to enter the market at this point for the same reason.

 

2- Unless you have no targets at all, the taking of your reward can be controlled in exactly the same way as your risk. You can't control whether on any specific trade your target or stop get hit - the market does that for you. Now this isn't to say that you should always get out at your max stop or target and not before. I think it's important to understand that when you enter a trade it's good to have an idea of market potential. Otherwise you'll end up taking lots of well controlled losses buying highs and selling lows - and that wouldn't be good :doh:

[DionysusToast 10]

I do agree that you shouldn't buy if you don't think the trade has potential to move up some. Still, the market will do whatever it will do. You can only control your risk and then do what you can to take some profits off the table.

 

I could put on a 2 point stop, look @ a monthly chart and say "all looks fine up to 1417" and set myself a huge target. Wouldn't do me a lot of good. Be a fine R:R though.

 

Of course, this is a silly example but then so is the concept of having a fixed R:R because the rewards side is only potential where the risk side is not. The risk side for most is is an absolute maximum risk, albeit with the chance to get out for less loss.

 

The reward side is a little different, the market will do whatever it wants to do. You only know reward after the event.

 

I do understand having space above in a long and limiting downside, I just think that berating someone on a forum because of some arbitrary minimum 1:2 (or whatever) ratio is a bit unfair tbh.

 

[/rant]

 

BTW - there's a guy on another forum who posts his trades daily - his historical R:R is .67 and he's quite profitable.

[DionysusToast 10]

In terms of my own trades, my default setting is as follows:

 

Initial stop : 4/5 ticks

Initial Target 1 : 4 ticks

Initial Target 2 : 8 ticks

Initial Target 3 : 12 ticks but this is managed out

 

With such a small stop, I cannot chase moves. What I will do on volatile days is to widen these stops/targets as I did yesterday.

 

In terms of the trade, let's take the example of a 5 contract trade

 

T1 - 3 contracts

T2 - 1 contract

T3 - 1 contract

 

When I get to my target 1, I move stop to break even MOMENTARILY. I have hit my T1 price but am waiting for a fill. At that point I set the stop to b/e whilst waiting for the fill. If I don't get filled & it comes back - I exit. If it gets filled, I move the stop back out of the way.

 

Once filled on T1

- I banked $150

- I am long 2 contracts, 4 ticks above my entry price

- My break even point on this trade is now 6 ticks below my entry price (2 contracts * 6 ticks = $150 banked).

- This means that at the time T1 is hit - my break even price is 10 ticks below, even though the market only moved up 4 ticks

- I now have a lot of breathing room

 

So - as long as I enter in a position where I think I have a good chance of getting those initial 4 ticks, I end up in a fairly stress free trade.

 

I am sure someone mathematically inclined can 'prove' to me that this is a terrible way to trade. Still, it's a very comfortable way to trade. It suits me.

 

The thing is though - I have absolutely no idea what all this means in terms of R:R...

[bakrob99 11]

  goodoboy said:

Is it just me, or have anyone notice after a big down day like today, always at the end about 2:40-3:15, price action goes up.

 

Is this short covering or real buying?

 

Short covering. And responsive buying at the lows.

 

I mentioned earlier in my post above that the larger players (funds) were unlikely to take positions in advance of the NFP (today). Without the longer terms traders - the market will behave in a responsive manner like this move which was an opportunity to buy at lower prices.

 

True trend days (down) do not rally into the close but close near the lows as the MOC orders are dumping the offside positions between 4 and 4:15 EDT.

 

What none of the Market Profile traders mentioned around here is that 1348.50 was the MONTHLY VPOC and this was a test of it.

[DbPhoenix 42]

  DionysusToast said:

I don't agree that your risk is always below support in a long. You do not need any support or resistance level to play off.

 

Note that I said "The risk is inherent in the trade (e.g., below support) and has nothing to do with how much risk one is willing to take", "e.g." meaning "for example". Risk is not of course always anywhere.

 

The point is that the risk and the reward are determined by the market not the trader, and certainly not by how much the trader is willing to lose. The market couldn't care less how much the trader is willing to lose.

 

As to the trader with an R:R of .67, sure, if his hit rate is high enough. But unless you've seen him trade over an extended number of trades in real time and/or you have an audited brokerage statement, don't believe everything (anything) you read.

 

Db

[DionysusToast 10]

Risk is only "below support" according to the way you look at the markets, though.

 

If I don't recognize your version of 'support', then there is no reason for me to consider that the cut-off point.

 

So - without understanding the way someone looks at the market, presuming that the next support level down is relevant is a little leap.

[DbPhoenix 42]

  DionysusToast said:

Risk is only "below support" according to the way you look at the markets, though.

 

If I don't recognize your version of 'support', then there is no reason for me to consider that the cut-off point.

 

So - without understanding the way someone looks at the market, presuming that the next support level down is relevant is a little leap.

 

As I said, using support as the risk level was an example. One can determine the risk however one chooses. But the risk level in the market is more pertinent than a risk level manufactured in one's head.

 

Db