Risk management advice for beginner ES trader

T

TSLexi

Hi guys!

I'll be beginning to trade the ES futures in a few months, and I'd like some advice on my risk management strategy:

1. Risk only 1% of my account (currently $200 as my account will be $20,000) on a single intraday trade, which means I will only be trading one contract per trade for now, as I have heard an account size recommendation of $20,000/contract.

2. After entering a trade, bracket the trade with an OCO pair consisting of a trailing stop-limit sell order placed 4 points below the entry price, and a trailing limit if-touched sell order placed 2 points above the entry price (for a long trade, reversed for a short trade). This will allow me to semi-automate my trading by removing the emotions from exiting trades, also minimizing my losses and protecting my profits.

3. Aim for a daily maximum allowable loss of 4 points, and a daily minimum profit target of 2 points.

Thanks for your advice!
 
I would re-exam your limits. If your max loss is 4 vs max gain of 2, you have to be very right all the time. I would consider reversing them.Keep your losses small and let your profits run.
 
rmorse said:
I would re-exam your limits. If your max loss is 4 vs max gain of 2, you have to be very right all the time. I would consider reversing them.Keep your losses small and let your profits run.
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Yes, I see that now. Also, my max gain was not 2, it was my minimum. I hope to make much more than that during trades, but 2 points is the minimum I'll be happy with.

Would you suggest removing the limit if-touched sell order? That would allow me to let my profits run.
 
I would suggest that you only enter trades that you feel have a positive expectation of profit. That means that after you do your analysis, you need to protect your capital when you are wrong and give yourself a chance to be right. After that, I'm not sure what is the best way to code that.
 
rmorse said:
I would suggest that you only enter trades that you feel have a positive expectation of profit. That means that after you do your analysis, you need to protect your capital when you are wrong and give yourself a chance to be right. After that, I'm not sure what is the best way to code that.
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I plan to enter a trade if the Heikin Ashi candlestick chart shows a strong trend, and I don't like automated trading systems. I'll protect myself with trailing stop-limit orders.
 
TSLexi said:
I plan to enter a trade if the Heikin Ashi candlestick chart shows a strong trend
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This is never going to work consistently in ES. Don't start with this instrument. Start with YM or NQ. ES is not the right instrument for a beginning futures trader. It's too thick, it doesn't trend like you think it trends, and you're just going to get chopped up daily. Additionally the tick/dollar ratio + spread isn't best for learning with a 200$ loss limit, IMO.

As Robert said, have a loss limit, but don't let that dictate your profit limits. Aim for consistency at first not hitting balls out of the park. Prepare for a steady ass kicking in the beginning, potentially for weeks and/or months.
 
i960 said:
This is never going to work consistently in ES. Don't start with this instrument. Start with YM or NQ. ES is not the right instrument for a beginning futures trader. It's too thick, it doesn't trend like you think it trends, and you're just going to get chopped up daily. Additionally the tick/dollar ratio + spread isn't best for learning with a 200$ loss limit, IMO.

As Robert said, have a loss limit, but don't let that dictate your profit limits. Aim for consistency at first not hitting balls out of the park. Prepare for a steady ass kicking in the beginning, potentially for weeks and/or months.
More...

Yeah, maybe I should trade the NQ instead.
 
A beginner should not be trading futures, least of all ES.

Watch out, you could blow up like Val Kilmer.

Try to find 27,000 instead of 20,000, then trade QQQ, 50/100 shares a time, you will lose less, and get cash experience, most likely, expect to lose.

Trick is to have enough capital by the time you get the hang of it, assuming you ever do.

Not trying to discourage you, but keeping it real.

Best of luck, you going to need it.
 
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