The eMini futures markets are both seductive and treacherous. On any given session a trader can find numerous opportunities. But along with opportunities come many hazards. In fact, navigating your way through an eMini session, without losing your hard earned capital, let alone your shirt, is much tougher than it seems. Whether you’re trading the Russell emini, the S&P, the Nasdaq or the Dow, here are some basic key pointers that you will want to pay attention to if you are serious about your futures trading.
First, limit your trading to a consistent time period. I personally will typically trade in the late morning. That’s because I am not available to commit to a consistent early morning schedule. However, the early part of the morning is a great time to focus on. Trading the PM session can also be good. In fact, you can break the day up into 2 or more “mini sessions” each with its own stop time and dynamic goal strategy (see number 2). The important rule here is to define your session and stick to it. Disciplined consistency is the key to success.
Second, create a dynamic goal setting strategy that allows you to quit positive on your terms. I try to get 2 winners and have a positive result. Because my strategy is so robust, I want one of those winners to be a full target winner to qualify for my “power of quitting” goals. Whether I am up by 1 tick or 4 points, I take what the market will give me while quitting positive on most sessions. I will keep trading until I have achieved that goal or, I hit my stopping time. That moves my account forward on a consistent basis while not giving back my winnings to the market. I quit on my terms in a dynamic way. Markets tend to trend and then consolidate, over and over again, so by using this type of dynamic goal setting on a day to day basis, you are able to take advantage of the best moves and stay clear of the choppy consolidations.
Third, find a good futures trading system that produces a real edge in the market, and learn it well. Manually backtest it thoroughly and then create your trade plan from what you discover. This will eliminate guesswork and will separate you from most other traders, who incidentally, fail to take this important step and also, fail as traders more often than they will succeed. Learn by NOT doing what losing traders do, or in this case, do what they do not do.
Fourth, limit your risk. Be adequately capitalized. Never risk > 2% of your capital on the average risk that your trading strategy demands. Use yesterday’s closing balance. Know the average risk your futures trading system uses per trade, from entry to stop. This can also be derived from backtesting. For example, If you have a $10,000 account balance, and the average risk your trading strategy puts on a Russell emini trade is 2 points ($100 per point), than based on your 2% rule, you would only be able to trade one contract. 2 x $100 = $200 = 2% of $10,000.
Finally, I would recommend that you find a mentor. One simple way to do this is to become a member to a good signal service. Find a signal service with a good reputation and a long term winning record. Also, and this is very important, try to find a signal service that actually trades a futures trading system that you are interested in trading yourself. That way, you could kill two birds with one stone, learning not only how to trade the strategy correctly, but also learning how to daytrade in general, with confidence, and with the support of the signal service host. Practice until you have developed your ability and confidence to trade for real.
There is a lot of money to be made daytrading but most traders don’t know when to quit and will often turn a positive session into a negative one. Or they don’t have their entire tradeplan figured out in advance. Or they break their own rules, get distracted, make mistakes, etc.. Having a mentor (or trading partner) is a great way to be disciplined because you will be held accountable for your actions or lack of actions. It forces you to trade your plan. Ultimately it takes a very profession mindset. You want to treat your trading as your business and not as a hobby, source of entertainment or anything else. If you exercise ‘best practices’ as outlined in this article, you will be ahead of a majority of traders out there and will be in the best possible position to succeed.