Fading the ES

J

jones247

Many traders, especially here on ET, warn against trading the ES, particularly if you are not experienced in trading the s&p e-mini. The reason given for this "warning" is the assertion that it's very "choppy", especially during times of lower volatility.

My simple perspective is... why not use the nature of the market against itself?? In other words, if the market whipsaws frequently on an intraday basis, then trade accordingly. Whether it's using price action, fib retracements or pivot points, it seems that one can be successful if you develop a FADE strategy INSTEAD of a TREND strategy for the ES. Needless to say, it would be imperative to have good risk/money mgmt to avoid the big losses when the market shift to a trend mode. If indeed the market ranges/whipsaws about 3 or 4 days per week, then a fade strategy with a 1:1 risk:reward mgmt is simply all that's needed to be profitable with this instrument.

Of course, there are additional filters and techniques that can enhance this basic strategy...(i.e. a 1:2 or 1:3 risk:reward, as well as a semi-martingale approach - periodically adjust contract size until profit target is reached, then re-set)

Walt
 
Exactly. When I first started trading it I got whipped all the time. I came upon a huge discovery....put your entry where your stop would otherwise be. Not the holy grail of course but I saw an immediate improvement in my results. If you want a trendy market trade bonds, if you want chop trade the ES.

Naturally, all markets change character. Be prepared to adapt and have a plan for a trend and chop.
 
Only if I can accurately predict the "trend" phases vs. the "chop" phases of the market... Since I'm not adept at consistently predicting the change from trend to chop, and visa versa, I could only wait until the market "shows its hand". Of course, the potential problem is that upon showing its hand, we don't know how long it will last - a day or a week or a year...
 
The main problem is how much you want to get vs how much you want to risk.

If you want too much and don't risk enough it won't work.
 
scaling out and or putting a stop to BE after it goes a point or two in your favor is key. It's chop, often goes 1 or 2 points in your favor then runs right back against you 1 or 2, so quick profits are key with several trades a day!
 
the other option is to set a a daily tp/sl target of 6/6 or 6/2...this reduces the transaction costs of slippage, bid-ask spread & brokerage fees, as there would only be 1 or 2 trades per day. Personally, I think scalping the ES is very costly and difficult...

Walt
 
Quote from jones247:

MIn other words, if the market whipsaws frequently on an intraday basis, then trade accordingly. Whether it's using price action, fib retracements or pivot points, it seems that one can be successful if you develop a FADE strategy INSTEAD of a TREND strategy for the ES. Needless to say, it would be imperative to have good risk/money mgmt to avoid the big losses when the market shift to a trend mode. If indeed the market ranges/whipsaws about 3 or 4 days per week, then a fade strategy with a 1:1 risk:reward mgmt is simply all that's needed to be profitable with this instrument.

Of course, there are additional filters and techniques that can enhance this basic strategy...(i.e. a 1:2 or 1:3 risk:reward, as well as a semi-martingale approach - periodically adjust contract size until profit target is reached, then re-set)

Walt
More...
ES doesn't trend a lot?? I wish it didn't. I wouldn't have lost 200 bucks trying to catch the top. :D
 
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