Before you start trading, it is very important that you know what it is that you are doing and what you are trading. It is similar to trading stocks but at the same time, very different. There is a definition of terms for those who need to know the basic language in the glossary.
We are trading the S&P 500 E-Mini Futures contract. This represents a shadow or a mirror of movement in the S&P 500 cash index. Traders and institutions across the globe buy and sell contracts with each other. For many, it is a hedge against a portfolio they own and sell contracts equal to the value of their portfolio as a form of insurance. Pension funds and large institutions do the same as well as mutual fund managers.
They are buying and selling protection in the form of contracts against the Index. To do this they need a very liquid pool of futures contracts to draw from and that is where the trader comes into the picture. He or she may not want to hedge their portfolio, but may want to speculate on the future direction of the market. Traders are an essential ingredient to offer the liquidity that the institutions need to quickly move into and out of the market.
I once heard a man ask a trader what he does for a living and his answer was, “I am an asset liquidity provider, how about you”. That statement is true. That is what we do.
Each contract traded represents 50 times the current value of the index. Lets say that the Index is 1000, a nice round number. Multiply 1000 x 50 = $ 50,000 and that is the value of one contract. If the index was trading at 1100 the value of the contract would be $ 55,000. You need to put up a deposit for the right to buy and hold a contract. If you hold the position over night, you will need about $ 5,000 deposit. If you close the position at the end of the trading session the margin will go down to about $ 1,250 for one contract.(day trade margin)
At Sniper Day Trading, we trade for a modest daily goal most days, between 2-4 points. The S&P 500 emini futures trades in ticks. There are 4 ticks that make up one point. Each tick is $12.50 and since there is 4 ticks to a point, one point is $50, 4 x $12.50= $50. If our daily goal is capture 2-4 points we are trading for $100-$200 dollars per contract traded. With an opening balance of $5,000 you could conceivably buy or sell 4 contract. So to use the example above, 4 contracts traded x 100 to 200 each contract, you would be making $400-800 per day.
We don’t recommend that traders start trading the maximum, but start at the smallest and work your way up. It is possible, averaging 2 points per day that in 4 weeks you could be trading at 4 contracts and bringing in the kind of money above. You can stay at that level or increase it over time. What ever you feel comfortable with. You may decide to go slower and reach that level in 2 or 3 months and that is OK. The main thing is averaging that 2 points per day over an extended period. It is very possible, people are doing that and more all over the country and you could to.
On the main page we talk a lot about discipline, patients, and focus, all essential things for reaching your goals. But first you need to know how to trade. I offer that in my course and if you decide to become part of the family, I will see to it that you understand my trading method and how to apply it.
When we put on a trade, we teach how to enter at just the right moment as the momentum will carry you higher or lower which ever way to you are trading.
Make Money as prices go up or down
Which brings me to my next point. You can make money in either direction, up or down. Often, prices go down a lot faster that they do going up. The principal works the same. When you put on a trade that is going up, we would call that a LONG TRADE and when you put on a trade that is going down, we call that a SHORT TRADE. We teach how to take these trades in a clear concise way. No gray area.
When we take a Long Trade, we Buy to Open / Sell to Close
When we take a Short Trade, we Sell to Open / Buy to Close
There is always someone on the other side of the trade to take the position, the price is the only thing that changes. If you sold the futures or “Shorted” the market at the S&P price of 1091 and you covered the trade by buying it back at a lower price at 1088, you just made a 3 point profit of $50 X 3 points = $ 150 dollars per contract traded.
Remember that each tick is broken up in quarters and 4 quarters make up 1 point. You can think of it like 4 quarters make a dollar, but in this case, it makes $50, because each tick is worth $12.50.
Commission cost for the transaction varies on the broker but the typical costs is about $2.00 to buy one contract and $2 to sell one contract. The complete transaction is called “round-turn”, buying, then selling.
TIME CHARTS
When building our charts on the screen, we use tick data. Tick data is different than time data. Trading in a one minute bar chart is the smallest increment of time that you can use. When using TICK CHARTS, you can create a much more detailed view of the trading history. It is through this trading history that we are able to draw up our entries in this much more detailed view. It allows us to enter at the exact point, Sniper Style, to hit our mark. Get in, Get out, Get done.
We teach precise entry and exit points using these tick charts and with the ongoing training you will always see the method applied to current data.
Above, is an example of a Candle Stick Chart. These are typical setups for us, as you can see the entries short and then long. The first trade was good for 1 to 2 points and the second good for the same or higher.
I usually follow bar charts that have an open, high, low and close to them, as shown above. Some people like using candle stick charts and that is a matter of preference. Candle charts have a wider body and make it a little easier to see the open, high, low and close, but using tick charts, often we need the screen room to see the complete patterns developing as well as one feature that I use to help visually see the change in direction. Often, this change in direction matches the other components of the method which helps to confirm our entry, LONG or SHORT.
Different Types of Orders
There are three main types of orders used in our style of trading. There are “Market Orders”, “Limit Orders” and “Stop Orders”. I use all three of them at different times for different reasons and explain it all in my course and mentoring program.
A market order, in our style of trading is typically used to close positions that are still open. Others may use them to start a position but we don’t often do that. It better serves us to use this order when we have an open position close to our stop loss and decide it is better to close the position and the protective stop at once. Both done with one click of the mouse at the same time.
A “Limit Order”, is an order to buy or sell at the specific price that we specify. See the example below. There is a blue column, the “Bid Size” and red column, the “Ask Size” This is where I place my orders. By clicking inside the blue column, price 1091.50, I am willing to buy at that price only. When contracts become available from the other side, the red column, my order is filled and I will have gone “Long the S&P emini futures market”. The opposite is true for “Selling Short”. This is an example of buying or selling with a “Limit Order”.
The last order type, “Stop Orders”, are usually used to protect a trader from incurring a greater loss than what he has predetermined ahead of time. For me, it is 1 point or less on all trades I put on. ($50 dollars per contract traded or less). That is the maximum loss and is set automatically at the time I click the order to buy. No need to do anything else. You can set predefined limit order targets and they can go up at the same time as your order entry as well. One click of the mouse and the rest of the entire process is complete. You can even stagger your “Limit Order Targets” if you trade more than one contract, say 1 point and 2 points. If the first one gets hit and filled, your stop loss will automatically adjust itself to only protect now the remaining half of your open position. Nothing else needs to be done, but just the one click order entry, period.
This is a very nice feature for those who may lack discipline in placing their stops and targets when and where they should after they enter the market. You can even use the one click feature just explained and use a “Trailing Stop Loss”. This will automatically move your protective Stop Loss up with say a rising market. You can set a trigger point, say its one point. When you reach that one point level you sell half your first position, every tick the market rises from there, your stop will rise by that much, keeping a 4 tick stop position. If the market had moved up 3 points quickly and came back 1 point, you would automatically sell your remaining position at 2 points, locking in your profit. This is because you preprogrammed it to do just that. This again is a great way to capture more profit in a fast moving market all automatically. The only thing that starts the process is just the one click of the mouse. Done. Very Cool. I, most often do it manually, but that is me. I can show you how to set this upin a blink of an eye and teach you to effectively use this feature.
Different Types Of Trading
There are different types of trading. The three most common, “Day Trading”, “Swing Trading” and “Position Trading”. Day Trading is what we do, because we never hold any position over night and make a few trades inside the daily session. Swing Trading, will carry positions over-night and hold those positions for several days. Position Trading, will hold similar trades but for several weeks or months.
Inside of Day Trading, there are several approaches as well. We look at three main tick charts, separated by small, medium and large time frames. Depending on the traders preference, if he or she has one, we can tailor our program to match your current trading style, or mirror what I am using for my trading. In our first meeting together, I will be able to help you discover what is the best time frame for you to start with. Naturally, I will show you how I set up my charts and fully explain the way that I trade. After that, we can go from there.
Scalp Trading
Scalp Trading, is often misunderstood. There is really no set definition that will clearly define it. It may mean one thing to someone and something else to another. That said, what I most often do is Scalp Trade the S&P 500 futures emini market. You can trade other markets like the Russell, the NASDAQ, or the Dow Jones. Each has an emini futures market that is liquid and very trade-able.
When the trading range is very narrow, scalping 2, 3 or 4 ticks, may be all the market safely gives you, without waiting around hours for a good trade setup. This is how I would define Scalp Trading.
With our base daily goal of 2 points or 8 ticks, you only really need say, 1 trade for 1 point and two trades for 3 ticks and that would also cover commissions and you are done for the day.
The setups are the same in the smallest time frame, as compared to the highest time frame, because the market is “Fractal” in nature. That means the same patterns and setups occur in all time frames across the board, showing a trading symmetry that is often seen in nature, below is an example of that.
With my trading approach, we are able to capture what the market is giving us. If the trading range is expanding and large swings are showing up, we can capture those moves for multiple point returns.
Scalp Trading, gives you the ability to save time in your trading, by getting in getting out and getting done with it and on to other things. I don’t trade all day, like many do. This style of trading offers the “Time Freedom” that many covet. Having the Trading Discipline to walk away after hitting our Day Trading Goal is key in keeping the struggle to a minimum.
Getting what you need from the market, is like shopping for fresh meat and produce at your local supermarket. If you try to stock up on too much, it will go bad and you will lose it all. I find the same true in trading, getting what you need for today is a better approach and produces trading discipline, controls greed and keeps the traders struggle manageable. It is a lot easier to get 2-4 point in a day verses 8-10 points in a day. When you are not able to reach this high trading goal, it will produce frustration and feelings of failure can creep in, derailing all of your efforts.
Controlling Fear and Greed
Many traders just starting out, soon discover that they have almost what seems like uncontrollable trading emotions. They find it difficult to stay focused and maintain control. Often, traders find themselves trading with their minds to focused on the money. That is a sure-fire way to slow your progress and often ruin it entirely.
Most traders have gone through this, but most don’t know how to break the bonds of these powerful emotions, Fear and Greed while Day Trading. The good news is, I do know and is very much apart of the Sniper Trading approach. These are things that I uncover and address to my students and take this part very seriously. Starting out, many are not even aware of these dangers, but that is my job to prepare you for any unforeseen problems that can come between you and your modest daily trading goal each day.
