Swing Trading the E-Minis

J

jasper6

I have been doing some research into swing trading the ES/NQ. One system I am looking at uses a single EMA on 30 min charts. It has several years of backtesting and looks to average 2-3 ES pts per day.

On one hand, this seems paltry. The travel range of the ES yesterday was something like 126 points. On the other hand, a positive expectancy system - even at this level - would lend itself to position sizing strategies that could make such a system very profitable over time.

People keep saying "the big money is in the big moves". I would like to hear from any ES/NQ swing traders out there. Is this about the average return on swing systems? Any input on the types of swing strategies that lend themselves to the ES/NQ? One thing the Perry Kaufman book made clear was that most trend following strategies were losers with the S&P.

Would I be better off just trying to make a couple high probability daytrades each day to net a couple points without the overnight risk?
 
Jasper are you saying that you want the single ema to be the entry and the exit?

The longer the time frame the better your profits will be with such a method. This is true of the length of you ema also. Using a single ma with price is the only way to go, imo. versus a moving average crossover method.

I know you want to mechanize the method as much as possible, which is good. But the ma is way better for getting you in than in optimizing profit. Also, have you factored in any slippage and commish?
 
Originally posted by jasper6
I have been doing some research into swing trading the ES/NQ. One system I am looking at uses a single EMA on 30 min charts. It has several years of backtesting and looks to average 2-3 ES pts per day.

On one hand, this seems paltry. The travel range of the ES yesterday was something like 126 points. On the other hand, a positive expectancy system - even at this level - would lend itself to position sizing strategies that could make such a system very profitable over time.

People keep saying "the big money is in the big moves". I would like to hear from any ES/NQ swing traders out there. Is this about the average return on swing systems? Any input on the types of swing strategies that lend themselves to the ES/NQ? One thing the Perry Kaufman book made clear was that most trend following strategies were losers with the S&P.

Would I be better off just trying to make a couple high probability daytrades each day to net a couple points without the overnight risk?
More...

That's alot of risk just to get 2-3 points if you ask me!

Part of the problem is that systems of this type cause you to buy on strength, sell on weakness. By the time a 30 minute chart has crossed the moving average, it's left alot of the table, both when you got in, and when you got out.

The big money IS made in the big moves. BUT, the typical SP move is a 1-3 day affair....and that will be a big move. Then it moves the other direction for a brief period...just enough to get all the systems in for the whipsaw!

You want to make 2-3 points a day? Surely you could look at an intraday chart and identify some likely situations where 2-3 points would result.

I don't know the average range over the course of 1 minute is...but it wouldn't surprise me if it were 1 point.

Just my opinion...I'm sure you'll get others. Good luck whatever you decide.

OldTrader
 
Originally posted by jasper6
and looks to average 2-3 ES pts per day.

On one hand, this seems paltry. The travel range of the ES yesterday was something like 126 points.
More...

jasper,

I would not be so quick to discount an avg. daily gain of just 2-3pts...

As long as the DD's are relatively tight, with a solid position sizing technique a "paltry" 2-3 pts a day can be a fortune over a long period of time...

Just my thoughts :)

PEACE and good trading,
Commisso
 
Originally posted by inandlong
Jasper are you saying that you want the single ema to be the entry and the exit?

The longer the time frame the better your profits will be with such a method. This is true of the length of you ema also. Using a single ma with price is the only way to go, imo. versus a moving average crossover method.

I know you want to mechanize the method as much as possible, which is good. But the ma is way better for getting you in than in optimizing profit. Also, have you factored in any slippage and commish?
More...

No, this system uses a profit target, a crash stop and a SAR at the EMA.
 
i used to trade a system like you describe until last jan..feb 2002 when i had a $6500 drawdown. the system was overall profitable but emotionally wiping out 77% of my profits in 6 weeks was something that disturbed me so much i quit the system. i think you need to discover how much drawdown you can handle. ALL long term systems have it.... believe me
 
Originally posted by OldTrader


That's alot of risk just to get 2-3 points if you ask me!

Part of the problem is that systems of this type cause you to buy on strength, sell on weakness. By the time a 30 minute chart has crossed the moving average, it's left alot of the table, both when you got in, and when you got out.

The big money IS made in the big moves. BUT, the typical SP move is a 1-3 day affair....and that will be a big move. Then it moves the other direction for a brief period...just enough to get all the systems in for the whipsaw!

You want to make 2-3 points a day? Surely you could look at an intraday chart and identify some likely situations where 2-3 points would result.

I don't know the average range over the course of 1 minute is...but it wouldn't surprise me if it were 1 point.

Just my opinion...I'm sure you'll get others. Good luck whatever you decide.

OldTrader
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OldTrader - any thoughts on what would be a good direction to look for buying on weakness and selling on strength? Using the VIX perhaps?

Also, I am getting confused. 2-3 points isn't worth the risk vs. 2-3 points daily makes you legendary.

How many average net daily points is respectable for swing trading? How about for daytrading? What's the benchmark? If you don't have something to compare to, how do you know if you are doing any good?
 
Originally posted by jasper6


Also, I am getting confused. 2-3 points isn't worth the risk vs. 2-3 points daily makes you legendary.

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I know this was not directed toward me, but since you started the thread I take it you are seeking advice so I will chime in;

Things are seldom so black and white in this game. Fact is both statements can be true...

To talk of 2-3pts a day w/out the otherside of the coin -----> RISK, is meaningless at best...

Risk and reward are almost always proportionate and you need both #'s to size your positions and determin the worthiness of a strategy...

A system producing 2pts a day with a historical max DD of only 30pts will be MUCH more profitable over the long run than one yeilding 5.5 pts with a historical max DD of 130pts (depending of course that you are trying to maintain an overall account % DD in the same range with both)...

Position Sizing / Risk Management is one of the biggest keys to this game, but sadly most traders minds are stuck on the upside potential only :( They simply neglect to see the "big picture"...

PEACE and goodtrading,
Commisso
 
Originally posted by jasper6


OldTrader - any thoughts on what would be a good direction to look for buying on weakness and selling on strength? Using the VIX perhaps?

Also, I am getting confused. 2-3 points isn't worth the risk vs. 2-3 points daily makes you legendary.

How many average net daily points is respectable for swing trading? How about for daytrading? What's the benchmark? If you don't have something to compare to, how do you know if you are doing any good?
More...

The idea that 2-3 points daily makes you legendary is something I've read here....but I don't happen to agree with it. I think that bar is awfully low.

Another standard is Linda Raschke (sp?). I read an interview in which she stated that her goal was to make the range every day. So if the range is 20 points then that's what she wants to make. Keep in mind as you stated already that the distance travelled throughout the day far exceeds the range.

I think where the guys come from that state that 2-3 points make you "legendary" is this: In the course of a month that means you made lets say $2K. If you had $10K in your account, this is a 20% return, which is clearly a superior return on a monthly basis.

But keep in mind that most people trading futures use leverage. Even $10K is leverage....it's only about 20% +/- of the total value of the contract....therefore the returns aren't comparable to those that you're used to seeing.

Personally I believe that if you're going to stare at a monitor all day long then you should be earning enough to compensate you....just like a lawyer, doctor ect. On top of that, you take large risks, and employ leverage. I believe you should be aiming for numbers like Linda Raschke to compensate for the time, effort and risk.

Now understand that this woman is talented and experienced. Whether you can duplicate her efforts right now is doubtful. But if you're looking at what kind of bar to set for yourself, why not set her bar? If you don't make it perhaps you'll still be over the 2-3 points.

And understand this: there is nothing about this business that's easy. Certainly it is not so easy that you can put up a 30 minute chart with a moving average on it and trade your way to wealth. I'm quite doubtful about this. Trading takes brains and boldness....there is no holy grail. And markets change over time.

I think it's worth noting that Linda as far as I know does not have a "system"....she uses strategies, she's technically oriented...but a mechanical system? I don't think so.

I suspect others will disagree with my comments.....

OldTrader
 
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