Today is Friday March 27th and I had another smooth day trading the S&P.
I had an interesting day today, in that I did not start trading the size that I wanted to, because I did not see great price action at the time I started trading. I put my first trade on at 8:12 am West Coast time, but it was not good enough for me to put the size on, so I waited. I did make a few nice trades and had a few small losses, working my equity up to around $1,000 in a little over 30 minutes.
I decided to take a break and do some teaching with a student of mine and came back later, after the market had a chance to change up its price action with a few new reads. At around 11:56 am, I put on a trade with 5+5 contracts, for a total of 10, at the same price of 813.75, and rode that up for 5 solid points of gain. I did not scale out of the trade, but just rode it up for all that it gave me.
The trade lasted only about 6 minutes. That trade added $2,500 dollars to the $ 1,000 that I already had, for a nice add on trade, taking me to $3,500 for the day. Once prices got over 815.50, there were other forces from higher time frame charts working to push the market higher. If you look back at your charts to that time, you may see what I am talking about.
As far as the broad market is concerned, the Index’s are still in a solid uptrend on the daily, with some overhead resistance on the Dow coming in a little over 8,000. There was very little pull back on the way up, which tells me that when the market does stop, there will be a nice reactionary move back down to the middle. In order for this uptrend to stay intact, the Dow will have to stay above 7,700 and the S&P above 813 on the cash, which is only a few points below where we currently are.
That is how I currently see it – you might view it differently. The maximum I see for the S&P is in the 840 range, before we see a pull back, but since we are very close to support right now, the 813 needs to hold on the cash market.
Below are some questions from someone interested in my method. I have answered all of these questions before, but I will do it again for everyone’s benefit.
I watch your videos on your blog and have some questions.Do you always use a trend-line break of some sort for entries?
Are the entries orders stop or limit orders and where are they placed?
I see reference to 5 tick stops. Doesn’t onessuccess rate have to be quite high when targeting 3-4 ticks with a 5 tick stop?
Do you offer any training beyond the blog videos?
Answer to #1 &2 ) I almost always look for some sort of trend line break to enter a trade. It may be that a pattern is developing, like a triangle or any other pattern. Upon the break or at a back fill point, you can enter the trade. I do occasionally enter on a buy stop, but that is not very often. So the limit order is what I most often use. By using limit orders, I have missed trades by not getting filled, but that does not bother me too much because I only need to wait for the next trade. If I extend myself too much by placing buy stop orders or sell stop orders to get into a trade, I sometimes need to take the trade farther to get filled, and expose myself to greater risk by getting stopped out. Most of the orders I place, I quickly move my stop up to 4 ticks, but when I do place a buy stop entry order or sell stop entry order, that is when I find I need the extra tick, so as not to get stopped out on a back fill of the original break out. It is not the same every time and would greatly depend on current price action.
Answer to #3 ) I use 4 and 5 tick stops almost always, rarely anything more. I see where you might be concerned with such a small stop – not many people can trade with their stop being this small. There are a few keys to being successful at this business. One is good timing. I have a set number of conditions that need to be present before an order should be placed. When those conditions are present, there is usually an 80% chance that I will hit 1 point of profit. My ultimate trading goal is to hit 2-3 points profit per day, every day. You only need to make 2 or 3 of these trades to make that happen. If you see a bigger potential of a move, you can scale out of your trade at, say, 1 point for the first half and something higher, like 2 points, just like I did yesterday. If I see a much larger potential, which does not always happen, I will elect to stay with the trade and have it give me whatever is in it, as with today’s trade of 5 points. It really all just depends on price action. That is why it takes time to learn the market ins and outs. There is no quick and easy way to master all that the market can throw at you in a short period of time. It can take years. But on the other hand, for someone who is satisfied with a daily income of 2 to 3 points profit, you can simplify the process a great deal.
Yes, you will miss big moves and yes, you could have made a lot more on certain trades, but if your goal is to make MONEY, then new traders need to be realistic in what they can expect from the markets.
If I place a trade and I only get the small move of 3 ticks on that trade, I would initially have my stop no more than a 4 tick stop. If the trade moves in my favor by 2 ticks, I move my stop to 3 ticks, and then maybe to 2 ticks, until I get filled. I am riding my small stop up with the move in my direction and hitting my small target 80+ percent of the time with a 3 tick fill. If you do the math, it comes out very nicely. In just a couple of trades, you are done.
Two trades for 1 point and 1 trade for 3/4 point, trading say only 4 contracts, will almost always give you $500 dollars in less than 30 minutes. That comes to $1,000 dollars an hour. Who makes that kind of money these days? The key is that you keep your personal struggle to get your daily goal to a minimum and then come back tomorrow to do it again.
As I wrote in my blog a couple of days ago, it can be difficult for traders to be able to identify which trades are going to run and which ones are only good for 1 or 2 points. The best way to handle that is to just trade everything for 1 or 2 points max. This will give you the opportunity to keep your focus on correct timing and not over thinking and analyzing for the big 3 or 4 to one profit ratio trade.
Answer #4) I can discuss with individuals interested in personal mentoring, one on one. I will see what your trading level is and go from there. It can be that my trading method does not work for everyone because of past trading habits that they may not be able to change. It will depend on the individual and how teachable they are. For some people it might be like putting a round peg in a square hole, and my style of trading does not match their personality.
But if you come with an open mind and want to learn what it is that I know, I would bet that I can help you become profitable. I can spend personal screen time going over my method so that you understand how it works and what it is that we look for in a trade setup. If you have Trade Station, I can set your screen up with everything I use to trade. If you are using Ninja Trader, then I can also set your screen up to very closely match my settings on Trade Station. Both are excellent platforms for trading the S&P. You will have access to my trading room for 2-3 months, where you will hear and see me put my trades on. I would want you to learn and not only follow my trades so I will have you understanding why I am looking to take each trade. Very important. We all need to think for ourselves. This is what will make good traders for the long term.
I have a trader that I am currently working with, and in this last week he is hitting over 80 percent on all of his trades, targeting for only one point. He is posting profit of about $1,000 dollars a day. He is getting it. There is still more work to do for him, but he is working hard on mastering his timing. He does better at long trades than short, but I am working with him to help him see where the correct timing is for those short trades. His concern is not looking for the monster trade of 5-10 points, but just cranking out 1 point trades with 4 contracts. What more could anyone ask for.
http://www.screencast.com/t/DgRVunye Today’s equity chart
Have a great weekend! Vince
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