By Doug Fisher
Participants in the financial markets all have their favorite indicators used to alert them when the possibility exist for trade entry. In this article, three indicators will be outlined that are utilized by successful traders to provide emini trading signals for market entry and exit.
Pivot Points
Pivot points are a common tool used by many emini index traders. Some traders use pivot points exclusively relying on pivot points in conjunction with only a time and sales screen, forgoing the use of charting software. While others will employ pivot points incorporating them in with their trading platforms to alert them when conditions are favorable for trade exit and entry. Because pivot points show areas of both strong and weak support and resistance, they are a popular choice among successful emini traders.
Relative Strength Indicator
The Relative Strength Indicator or RSI is a graph which usually resides on the lower part of charting software. Used mostly to determine both oversold and overbought conditions, this widely used indicator displays a reading between zero and one hundred with a line moving between these two numbers. As the line moves up toward the 100 mark, the RSI indicates the market could be moving into overbought territory and the possibility exist that a pull back or market reversal could be at hand. When the line approaches the zero level, indications are favorable that oversold conditions exist and the market could be about to change to the upside as short sellers begin to take profits.
Stochastic
The Stochastic is another indicator similar to the RSI which is a popular choice among emini trading futures market players. It is also a graph that usually resides in the lower section of charting software. Like the Relative Strength Indicator, both lagging indicators, the Stochastic also has a range of between zero and one hundred. With this tool, conditions are generally believed to be approaching overbought conditions when the Stochastic line crosses 70. In contrast, oversold conditions are said to exist when the Stochastic breaks below 30 and sellers begin to cover short positions.
Emini contracts are an excellent choice for obtaining short term profits in the futures markets. The above emini signals are just some of the tools used by successful traders to make short term profits with index futures contracts.
Monday, August 31, 2009
Thursday, August 13, 2009
Do You Over-Trade Your Emini Account
By David S. Adams
One characteristic of novice traders and ineffective traders is to make too many trades every day. 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 good trade set ups on the average trading day. I don't think I have made more than 10 trades on a given day, and I was probably guilty of overtrading on that day.
Trading too much during a trading session can eat away at your profits. On the other hand, your futures broker will love you because his commission account will soar, but I don't think your 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 to ask yourself as you prepare to enter a trade.
I think the root cause for over trading has its roots in emotion, specifically greed. After all, every trade has the possibility to make money, and making money is the reason most of us trade the emini contract. 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 have 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 in the market during the normal market action I observe. A scalper is a gunslinger, of sorts. Which is to say I look to make 5-8 trades a day that achieve my profit target. My average trade last 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 make too many trades. 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 counter trend trades, which are the bane of my existence. Counter trend trades must be scrutinized with the greatest of care because they 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 counter trend trades and I try to avoid them. You should too, the trend is your friend, and counter trend trading will make you old before your time and devastate your trading account.
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 contract, you should note the Average True Range, and if it is swing 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, and a profitable trade is more a function of luck than skill. Volatile markets, with the long bars and flags which are typical of this phenomena are good days to golf, as trading is a risky proposition. You will see many nice setups but 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.
One characteristic of novice traders and ineffective traders is to make too many trades every day. 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 good trade set ups on the average trading day. I don't think I have made more than 10 trades on a given day, and I was probably guilty of overtrading on that day.
Trading too much during a trading session can eat away at your profits. On the other hand, your futures broker will love you because his commission account will soar, but I don't think your 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 to ask yourself as you prepare to enter a trade.
I think the root cause for over trading has its roots in emotion, specifically greed. After all, every trade has the possibility to make money, and making money is the reason most of us trade the emini contract. 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 have 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 in the market during the normal market action I observe. A scalper is a gunslinger, of sorts. Which is to say I look to make 5-8 trades a day that achieve my profit target. My average trade last 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 make too many trades. 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 counter trend trades, which are the bane of my existence. Counter trend trades must be scrutinized with the greatest of care because they 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 counter trend trades and I try to avoid them. You should too, the trend is your friend, and counter trend trading will make you old before your time and devastate your trading account.
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 contract, you should note the Average True Range, and if it is swing 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, and a profitable trade is more a function of luck than skill. Volatile markets, with the long bars and flags which are typical of this phenomena are good days to golf, as trading is a risky proposition. You will see many nice setups but 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.
Wednesday, August 5, 2009
Emini Day Trading Course - How to Use Indicators For Your Trading?
By Waldemar Puszkarz
You can trade emini futures using indicators. You can also trade eminis without them, meaning by relying only on the price action and, perhaps, some simple tools like straight lines. Some of these lines can be horizontal lines, they indicate support and resistance areas, or they can be trend lines showing the support in the trending market. The breakout of the trend line suggests that the trend is about to change, and may even reverse depending on its strength.
While relying on the price action and simple tools mentioned above can be good in some situations, you can improve your trading decisions by incorporating indicators.
The simplest example of such indicators are moving averages of various kinds ranging from simple moving averages through exponential moving averages to a host of other, more sophisticated ones, although not necessarily better. Moving average lines play the same role as trend lines. Using more than one moving average, of a slower period and a faster one, can give us the idea of change in trend. This is usually noted by the crossing of such moving averages.
Other commonly used indicators are oscillators. They are more complex if only because they tend to be derivatives of moving averages. As such they are suitable to indicate the change in the market momentum. That's one of their particularly useful applications. They can also indicate situations when the market is oversold or overbought and thus likely to rebound from such extreme conditions. Unfortunately and ironically enough, since the overbought and oversold conditions are also indicative of strong upward and downward momentum, the market may as well continue its trend. Indicators of this kind include stochastics, RSI, and CCI.
Indicators can be used in two major ways. One was already mentioned, that is, to indicate certain market conditions, like a strong momentum. Another way is to time entries. That's how stochastics can be used, for instance. The crossing of stochastics lines, the faster with the slower one, can be employed to time the entry or the exit. Very often, the timing like that is of rather poor quality and that usually has to do with low market volatility, which leads to rather erratic price movement. High volatility is not so common, but when it appears, using indicators for timing the entries or exits can be about as good as using the price action, although the intelligent trader always tries to combine both, meaning the indicators and the price action patterns.
You can trade emini futures using indicators. You can also trade eminis without them, meaning by relying only on the price action and, perhaps, some simple tools like straight lines. Some of these lines can be horizontal lines, they indicate support and resistance areas, or they can be trend lines showing the support in the trending market. The breakout of the trend line suggests that the trend is about to change, and may even reverse depending on its strength.
While relying on the price action and simple tools mentioned above can be good in some situations, you can improve your trading decisions by incorporating indicators.
The simplest example of such indicators are moving averages of various kinds ranging from simple moving averages through exponential moving averages to a host of other, more sophisticated ones, although not necessarily better. Moving average lines play the same role as trend lines. Using more than one moving average, of a slower period and a faster one, can give us the idea of change in trend. This is usually noted by the crossing of such moving averages.
Other commonly used indicators are oscillators. They are more complex if only because they tend to be derivatives of moving averages. As such they are suitable to indicate the change in the market momentum. That's one of their particularly useful applications. They can also indicate situations when the market is oversold or overbought and thus likely to rebound from such extreme conditions. Unfortunately and ironically enough, since the overbought and oversold conditions are also indicative of strong upward and downward momentum, the market may as well continue its trend. Indicators of this kind include stochastics, RSI, and CCI.
Indicators can be used in two major ways. One was already mentioned, that is, to indicate certain market conditions, like a strong momentum. Another way is to time entries. That's how stochastics can be used, for instance. The crossing of stochastics lines, the faster with the slower one, can be employed to time the entry or the exit. Very often, the timing like that is of rather poor quality and that usually has to do with low market volatility, which leads to rather erratic price movement. High volatility is not so common, but when it appears, using indicators for timing the entries or exits can be about as good as using the price action, although the intelligent trader always tries to combine both, meaning the indicators and the price action patterns.
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