Making a Living Off of Trading 1 Contract a Week

[suby 10]

I see that theres been some discussion here lately about how you should stop being a home run hitter and go for 1 and 2 points...

 

If you look at the daily range on any of the contracts (indices specifically) why not try to be a home run hitter!?

 

I diverged a bit but I wanted to pretty much open up this thread to people who are making a decent living off of trading a couple contracts a week. Can it be done? Whats your weapon of choice? How do you approach it?

 

I personally like to trade the NQ and I really can't stand all this talk about going for 1 or 2 points. I don't believe markets are random but I do believe that with the advent of HFT, your really flipping a coin in this dya and age when your scalping - Hence why the average retail trader's edge is not in scalping but in attempting to hit home runs, or swinging for that matter.

 

I look forward to hearing from the community

[suby 10]

  mitsubishi said:

Small targets,tight stops,frequent trading/more commisions,low starting capital-unable/unwilling to hold overnight-if daytrading the logical solution is smaller size,bigger targets,and stops outside the "the noise" ie not in the place most likely to get hit.

 

This guy has some ideas that could help,he calls it "harmonic rotation"I guess you either keep your stop away from those zones or you aim for them ie enter while others are covering.

futurestrader71 - $NQ_F http://stks.co/2SsS NQ Harmonic rotations study result... | StockTwits

 

February 7th Chat: Harmonic Rotations | FuturesTrader71

 

Thanks for this Mitsubishi.

 

I must admit, I am a tape reader at heart but I really hate staring behind the monitors for the entire session. It creates clouded thinking because of uncertainty. All of my successful trades have come from a considerable amount of backtesting and research

[BlueHorseshoe 10]

  mitsubishi said:

This guy has some ideas that could help,he calls it "harmonic rotation"I guess you either keep your stop away from those zones or you aim for them ie enter while others are covering.

futurestrader71 - $NQ_F http://stks.co/2SsS NQ Harmonic rotations study result... | StockTwits

 

February 7th Chat: Harmonic Rotations | FuturesTrader71

 

I got some useful ideas from that - thanks!

 

BlueHorseshoe

[DbPhoenix 42]

  suby said:

I see that theres been some discussion here lately about how you should stop being a home run hitter and go for 1 and 2 points...

 

If you look at the daily range on any of the contracts (indices specifically) why not try to be a home run hitter!?

 

I diverged a bit but I wanted to pretty much open up this thread to people who are making a decent living off of trading a couple contracts a week. Can it be done? Whats your weapon of choice? How do you approach it?

 

I personally like to trade the NQ and I really can't stand all this talk about going for 1 or 2 points. I don't believe markets are random but I do believe that with the advent of HFT, your really flipping a coin in this dya and age when your scalping - Hence why the average retail trader's edge is not in scalping but in attempting to hit home runs, or swinging for that matter.

 

I look forward to hearing from the community

 

It depends in part on what one means by "making a living". I, for example, have no debts. Therefore my cost of living is a small fraction of what it would be for most.

 

More than that, however, it is not so much a matter of strangling price and taking quick profits, or losses, nor of hitting it out of the park. Rather it is a matter of understanding price movement, taking off the collar, and letting it do what it wants to do.

 

The "harmonic rotation" study, for example, arrives at a conclusion, or at least a hypothesis, that is more or less true, but it gets there in a roundabout way, ignoring the dynamics of price movement. Yes, it is true that the "adverse excursions" or reactions in the NQ tend to range from 4 to 9pts. However, this is of little use in real-time trading, unless one is willing to sit helplessly like a deer in headlights and hope feverishly that price won't retrace more than nine points. To do so without understanding what he's looking just increases the likelihood of loss, which increases the fear and frustration that the trader feels, which makes it that much more unlikely that his next trade will be a successful one.

 

The extent of the retracement has less to do with statistical study than with the psychology of those who are holding and those who want to get in. This is why a retracement equivalent to or less than 50% suggests strength while a retracement greater than 50% suggests weakness. How far the retracement goes depends on how far the preceding rally or reaction got.

 

For example, if as on Friday the NQ rallies 8pts, the reaction should not move more than 4pts, which is what it did. If it subsequently rallies 17pts, it should not retrace more than 8.5pts (it retraced 10, finding support at the last swing high, to the tick, depending on one's data feed).

 

The day before, price opened to 80, fell to 68, and retraced 50%, after which it fell back and tried to rally again, all the way back to 80, where it retraced 50%. It then rallied 7pts, to 81, then retraced much more than 50%, leading to a 20pt decline.

 

What matters, then, is not the number of points in the retracement but the relationship of the retracement to the immediately preceding move, which is why the point retracements in the ES will be different than those in the NQ.

 

Rather than "hitting home runs", then, one should focus on letting price do what it's going to do, then step in when it looks like price is going to stop doing it and do something else instead.

[williammanda 10]

  suby said:

I see that theres been some discussion here lately about how you should stop being a home run hitter and go for 1 and 2 points...

 

If you look at the daily range on any of the contracts (indices specifically) why not try to be a home run hitter!?

 

I diverged a bit but I wanted to pretty much open up this thread to people who are making a decent living off of trading a couple contracts a week. Can it be done? Whats your weapon of choice? How do you approach it?

 

I personally like to trade the NQ and I really can't stand all this talk about going for 1 or 2 points. I don't believe markets are random but I do believe that with the advent of HFT, your really flipping a coin in this dya and age when your scalping - Hence why the average retail trader's edge is not in scalping but in attempting to hit home runs, or swinging for that matter.

 

I look forward to hearing from the community

 

There are ways to trade with or against "HFT" and scalp many emini markets as well as homeruns. You first need to understand how they trade. Once you do and your method is sound then trading regularly with high probability setup(s) is very realistic and a decent living follows.

[eminiman414 10]

  DbPhoenix said:

 

What matters, then, is not the number of points in the retracement but the relationship of the retracement to the immediately preceding move, which is why the point retracements in the ES will be different than those in the NQ.

 

 

Should one also consider the distance of the down move before the rally as a clue to how far the current retracement may go?

[DbPhoenix 42]

  eminiman414 said:

Should one also consider the distance of the down move before the rally as a clue to how far the current retracement may go?

 

It's all part of the picture. You may be working your way toward a trend, a trading range, or a hinge. Each wave is a tell, and at some point, traders will show their hands.

[goodoboy 10]

It really depends on what makes you comfortable.

 

I been watching price action of the ES for nearly 1.3 years. And I have notice that each week a good opportunity arises for big points (5-10 pts). Usually support and resistance trading is easier for me. However, daily I look for a good trade. I think risk vs reward means alot.

 

I'm not sure if I am making sense here. It depends on the instrument too. I know for ES, it requires patience and you have to wait if trading one contract. Also, trading one contract is tuff work man. I am using two contracts and it does help for patience.

[suby 10]

  DbPhoenix said:

It depends in part on what one means by "making a living". I, for example, have no debts. Therefore my cost of living is a small fraction of what it would be for most.

 

More than that, however, it is not so much a matter of strangling price and taking quick profits, or losses, nor of hitting it out of the park. Rather it is a matter of understanding price movement, taking off the collar, and letting it do what it wants to do.

 

The "harmonic rotation" study, for example, arrives at a conclusion, or at least a hypothesis, that is more or less true, but it gets there in a roundabout way, ignoring the dynamics of price movement. Yes, it is true that the "adverse excursions" or reactions in the NQ tend to range from 4 to 9pts. However, this is of little use in real-time trading, unless one is willing to sit helplessly like a deer in headlights and hope feverishly that price won't retrace more than nine points. To do so without understanding what he's looking just increases the likelihood of loss, which increases the fear and frustration that the trader feels, which makes it that much more unlikely that his next trade will be a successful one.

 

The extent of the retracement has less to do with statistical study than with the psychology of those who are holding and those who want to get in. This is why a retracement equivalent to or less than 50% suggests strength while a retracement greater than 50% suggests weakness. How far the retracement goes depends on how far the preceding rally or reaction got.

 

For example, if as on Friday the NQ rallies 8pts, the reaction should not move more than 4pts, which is what it did. If it subsequently rallies 17pts, it should not retrace more than 8.5pts (it retraced 10, finding support at the last swing high, to the tick, depending on one's data feed).

 

The day before, price opened to 80, fell to 68, and retraced 50%, after which it fell back and tried to rally again, all the way back to 80, where it retraced 50%. It then rallied 7pts, to 81, then retraced much more than 50%, leading to a 20pt decline.

 

What matters, then, is not the number of points in the retracement but the relationship of the retracement to the immediately preceding move, which is why the point retracements in the ES will be different than those in the NQ.

 

Rather than "hitting home runs", then, one should focus on letting price do what it's going to do, then step in when it looks like price is going to stop doing it and do something else instead.

 

DB pheonix thank you for posting this.

 

Sorry for the tardy reply. I have revisited this thread and am a little confused with one thing. Your addressing 50% reactions/retracements.

 

 

In regards to this paragraph:

 

"The day before, price opened to 80, fell to 68, and retraced 50%, after which it fell back and tried to rally again, all the way back to 80, where it retraced 50%. It then rallied 7pts, to 81, then retraced much more than 50%, leading to a 20pt decline."

 

how is 80 to 68 a 50% retracement? I apolgozie for being naive...

[suby 10]

  goodoboy said:

It really depends on what makes you comfortable.

 

I been watching price action of the ES for nearly 1.3 years. And I have notice that each week a good opportunity arises for big points (5-10 pts). Usually support and resistance trading is easier for me. However, daily I look for a good trade. I think risk vs reward means alot.

 

I'm not sure if I am making sense here. It depends on the instrument too. I know for ES, it requires patience and you have to wait if trading one contract. Also, trading one contract is tuff work man. I am using two contracts and it does help for patience.

 

Goodoboy,

 

How do you define your parameters for support and resistance.

 

I was wondering if you could provide an example with how you define S/R throughout the week and how you would go about slicing a trade from that

[suby 10]

  DbPhoenix said:

It's all part of the picture. You may be working your way toward a trend, a trading range, or a hinge. Each wave is a tell, and at some point, traders will show their hands.

 

DB how long have you been trading for and where did you develop your methodology from?/What other traders do you view as mentors to yourself?

[DbPhoenix 42]

  suby said:

DB pheonix thank you for posting this.

 

Sorry for the tardy reply. I have revisited this thread and am a little confused with one thing. Your addressing 50% reactions/retracements.

 

 

In regards to this paragraph:

 

"The day before, price opened to 80, fell to 68, and retraced 50%, after which it fell back and tried to rally again, all the way back to 80, where it retraced 50%. It then rallied 7pts, to 81, then retraced much more than 50%, leading to a 20pt decline."

 

how is 80 to 68 a 50% retracement? I apolgozie for being naive...

 

If you'll post a 1m chart of the NQ for 3/21, I'll show you.

[suby 10]

  DbPhoenix said:

If you'll post a 1m chart of the NQ for 3/21, I'll show you.

 

having troubles extracting from my think or swim charts...

[steve46 12]

on my way out the "digital door" so to speak I saw this, and have to offer a comment

 

First I am pretty sure I qualify as a skilled person, certainly have plenty of experience with this market. I would find it very difficult to make a living trading one, unless I had a significant amount of capital behind it...say a minimum of 5K

 

I do however think a disciplined person using a decent system would have a chance if they had a min 2 contracts and (again) at least 5k discretionary capital behind them...in fact I am in the process of proving that to myself right now using a simplified system. The problem is that you have to be willing to wait for the high probability opportunities and in THIS market (S&P Futures) they tend to occur late at night when most of you are asleep...

 

Seeya

[suby 10]

  steve46 said:

on my way out the "digital door" so to speak I saw this, and have to offer a comment

 

First I am pretty sure I qualify as a skilled person, certainly have plenty of experience with this market. I would find it very difficult to make a living trading one, unless I had a significant amount of capital behind it...say a minimum of 5K

 

I do however think a disciplined person using a decent system would have a chance if they had a min 2 contracts and (again) at least 5k discretionary capital behind them...in fact I am in the process of proving that to myself right now using a simplified system. The problem is that you have to be willing to wait for the high probability opportunities and in THIS market (S&P Futures) they tend to occur late at night when most of you are asleep...

 

Seeya

 

Steve,

 

Thanks for the input. Why do the high probability set ups occur during the night? I think last night is a perfect example of this when the market began to rally when the european session opened. I don't know why... but I would love to know the cause and the effect of this.

[DbPhoenix 42]

  steve46 said:

The problem is that you have to be willing to wait for the high probability opportunities and in THIS market (S&P Futures) they tend to occur late at night when most of you are asleep...

 

Seeya

 

You may be right re the ES. And this is often the case with CL. But the NQ generally moves best during the first 90-120m, which is one reason why I like it so much.

[SIUYA 11]

  suby said:

Steve,

 

Thanks for the input. Why do the high probability set ups occur during the night? I think last night is a perfect example of this when the market began to rally when the european session opened. I don't know why... but I would love to know the cause and the effect of this.

 

at an answer - often without any substantial change in news overnight moves might be caused by the thin volumes and a vacuum (so to speak) of orders trying to push an instrument.

Often if this push is against the trend in which case a good opportunity for the main trend to reassert itself when it reopens, hence providing good opportunities.

(Often individual stocks that are traded overseas in different markets as ADRs exhibit this - maybe its because some funds only trade in local instruments or their time zone, or because the main flows pushing the trend are suddenly absent - hence the vacuum)

[uexkuell 10]

  suby said:

Why do the high probability set ups occur during the night? I think last night is a perfect example of this when the market began to rally when the european session opened. I don't know why... but I would love to know the cause and the effect of this.

 

You gave the answer in the question:

 

Reason is news in Europe

(in this case it just meant no bad news from Italy or Cyprus.)

[suby 10]

  SIUYA said:

at an answer - often without any substantial change in news overnight moves might be caused by the thin volumes and a vacuum (so to speak) of orders trying to push an instrument.

Often if this push is against the trend in which case a good opportunity for the main trend to reassert itself when it reopens, hence providing good opportunities.

(Often individual stocks that are traded overseas in different markets as ADRs exhibit this - maybe its because some funds only trade in local instruments or their time zone, or because the main flows pushing the trend are suddenly absent - hence the vacuum)

 

 

Siuya,

 

Thank you for the insight. A light bulb seriously just went off in my head reading what you wrote... Essentially one is attempting to front run the market by trading at those hours correct?

 

When basing a decision on entering a trade like that... Are you going off of the global economic calender and looking for price distortions in a specific market? or are you simply reading bloomberg or the bbc before the european open?

[suby 10]

  uexkuell said:

You gave the answer in the question:

 

Reason is news in Europe

(in this case it just meant no bad news from Italy or Cyprus.)

 

Uexkuell, interesting!

 

The question is, where is someone grabbing their news from. I'm guessing that this is purely a discretionary form of trading and would be impossible to model through predictive analytics?

[timratliff 10]

I think it would be incredibly difficult to make a living trading 1 contract a week, however it's not difficult to make a living getting 2 (ES) points a day. Once you learn how to consistently nab a net of 2 points per day, you scale contract size based upon your overall account balance.

[Beansforme 10]

  suby said:

I see that theres been some discussion here lately about how you should stop being a home run hitter and go for 1 and 2 points...

 

If you look at the daily range on any of the contracts (indices specifically) why not try to be a home run hitter!?

 

I diverged a bit but I wanted to pretty much open up this thread to people who are making a decent living off of trading a couple contracts a week. Can it be done? Whats your weapon of choice? How do you approach it?

 

I personally like to trade the NQ and I really can't stand all this talk about going for 1 or 2 points. I don't believe markets are random but I do believe that with the advent of HFT, your really flipping a coin in this dya and age when your scalping - Hence why the average retail trader's edge is not in scalping but in attempting to hit home runs, or swinging for that matter.

 

I look forward to hearing from the community

 

With a good money management strategy, you can be very profitable with 50% winners, or by flipping a coin. With that said, I tend to agree with you. I don't understand the desire to sit in front of a computer screen all day trying to scalp for tiny moves. Given that the vast majority of day traders trade this way, and LOSE, maybe it's a better idea to try something different.