The Evolution of an E-mini Trader

Huios,

Your Trade no2, the one you bought at the .382 ret. If you look at a 5min chart you would not have taken that trade. It stopped at the .382 but with no break of the high of the bars there was no confirmation.

However if you look at the .618 ret on the 5min chart you can see a break of the high of the bar giving you confirmation to take the trade long. It was worth 2pts with a 1pt stop.

Before you ask no I didn't take that trade as my bias was to the short side for the day.

Good trading
 
Hi Huios...have you ever averaged down or up? For example say you enter e-mini (es) short at 1000 when your indicators/guess said to go short and the price ticks up to say 1002. Instead of closing out the position with a stop loss at 1002 and assuming you had enough margin did you (would you) ever average up by going short 2 additional contracts? Math is 1000 plus 1002 x 2 = 3004...and not considering commissions 3004 divided by 3 = 1001.33. Then say it went against you an additional 2 points at which point you go short an additional 4 contracts. Math is 1000 plus 1002 x 2 plus 1004 x 4 = 7020..... and 7020 divided by 7 = 1002.86. If you then ran out of money to short more you could close out the 7 contracts at say 1006 and you're loss is then = to 1006 less 1002.86 = 3.14 x 7 x $50 = $1099. The advantage of the above averaging is if you are convinced your original decision to go short is valid you don't get stop out (until it went 6 points against your 1000 entry price) and when/if it turns before reaching 1006 you are never that far away from a profit. Hope I got my math correct!
 
Larry B,

Don't take offence but anyone that trades like that will find themselves in the poorhouse very quickly.. That is the quickest way to lose all your money averaging down. Any good trader will tell you that. Any good book will tell you that. Don't do it.

Do you trade like that Larry??
 
Dizzy,

We went through this on a lengthy thread not too long ago. I happen to agree with Larry, at least within limits and at certain times. Doubling up is a powerful technique for experienced index futures traders. I don;t advocate it for stocks, and I only do it intraday.

There are a number of rules to follow. If one follows them, there is no reason to assume it is courting disaster or is a sure road to a blowout. In fact, you can turn many losing trades into scratches or better, and that makes a big difference in your returns.

The main rule is you must wait for price to get near your stop and make sure it is just not going to blow through your stop. So you would be looking for momentum to stall out. You don't want to double up too soon because you will just be lsoing on double your original position. The most important rule is if price does go through your stop, you must immediately get out of everything. Some people will widen the stop a little after doubling. Personal preference but you are making a more aggressive play when you do that. Final rule and almsot as important as the preceding one: when you get back hopefully to break even on your entire position, get out. This is a repair strategy, not a way to pyramid profits. The fact that the original trade went against you tells you the situation is dicey, so take the b/e trade and be glad you got it.

The logic of this technique is just as Larry described. You only have to retrace half the move to get out whole. Plus you are not risking that much extra on the additional contract. If it moves much against you, you just blow out the whole position.

To prevent having to reply to everyone who will say that averaging down is a foolish move, etc, let me reemphasize that it is a short-term technique for highly experienced and disciplined traders to repair a losing trade. Too many of you have had it beaten into you that taking losses is somehow good for you. It's not. It's just better than taking bigger losses.

This technique is explained in detail in the great book West of Wall Street.
 
Originally posted by Dizzyspell
Larry B,

Don't take offence but anyone that trades like that will find themselves in the poorhouse very quickly.. That is the quickest way to lose all your money averaging down. Any good trader will tell you that. Any good book will tell you that. Don't do it.

Do you trade like that Larry??
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That is not true at all...You just have to know when you are wrong and have deep enough pockets to absorb the loss...Marty Schwartz used scales for years and he has an outstanding track record...You just have to get the math right and know what invalidates the trade...And averaging down inside a range is quite popular...As far as books go, there are few of them that having anything new or original to add anyway
 
well said...it all goes back to time frames, risk and profit objectives again...How many bigger traders put on their entire position at one price and then say to themselves, I will get out after 1 point of noise against me...The noise in these markets is extreme, with buy/sell programs hitting all the time, sloppy entries and exits buy the big commercials getting run against for a few points,etc...If you are truly proactive and have a valid signal and are trading outside of a 2-3 point range, and can afford to trade more size, it is the best strategy because you are not only improving your cost, but you are getting positive slippage on your entries...and if you are exiting WITH trend you are getting positive slippage on your exits...Mark Cook and Marty Schwartz have done alot of work on short term scales...

In another post, I said something like given this scenario..."market breaks up or down, but the risk of retracement is pretty strong...how do you ensure participation without getting run over on any movement against you.."why not initiate with a fraction of the size so you have something if it moves your way, if it moves against you, the trend or swing is established and you add to your position...etc...

The markets past few weeks are pretty much straight up, straight down, have to know the environment before getting too deep into the scales...There is no question that they can do some damage if sloppily planned or mis-managed...But the strategy itself is exception if/when done correctly...It takes confidence, preparation and conviction...very difficult, indeed, but it can be done
 
Originally posted by Huios
I am a scalper, not a swing trader.

I like trading a 1 minute chart, not a 5 minute chart.

I like the risk of a scalper, not the swing trader.

The wins of a scalper are ok with me, and if I only occasionally get a good run, that's ok. 1-2 points, several times a day are fine for now.

I'm out of the closet!!!!!

I know there are many styles of trading, and you have to trade how you are comfortable trading. Since I am learning, I want the smaller risk. Capital preservation is my number one concern. Even though a 2 pt loss is only about 1% of my trading equity, and if I blow out this one (lose 50% of it) I can replace it twice, I still want the smaller risk. If I manage my losses, the wins will take care of themselves.

I am comfortable with the dynamics of scalping. Vulture says in and out of trades quick and the reflexes have to be sharp. My costs are as low as I can make them. My setups are good and getting better. I stalk my trades on the 5 min, but the trigger is on the 1 min. My exits (now that I know what I am) will improve tremendously. I am setting targets. Downfalls - overtrading and churning.

I AM SCALPER, HERE ME ROAR!!!

Boy does that feel good.

(comments, critques, and loose change accepted)

:D
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Huios:

Are you trading multiples or single contract positions? If you can trade multiples then you have more flexibility.
 
larryb
...have you ever averaged down or up?
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No, I have not. From what I've read, that is an advanced technique for "experienced index futures traders" as AAA said. And I ain't experienced.

Also, thanks for the math, as I wasn't quite sure I knew how it worked, although I heard it debated from time to time. Adding to a losing position was always on the con side.

AAA
The main rule is you must wait for price to get near your stop and make sure it is just not going to blow through your stop. So you would be looking for momentum to stall out. You don't want to double up too soon because you will just be lsoing on double your original position. The most important rule is if price does go through your stop, you must immediately get out of everything.... Final rule and almsot as important as the preceding one: when you get back hopefully to break even on your entire position, get out. This is a repair strategy, not a way to pyramid profits. The fact that the original trade went against you tells you the situation is dicey, so take the b/e trade and be glad you got it.

...let me reemphasize that it is a short-term technique for highly experienced and disciplined traders to repair a losing trade. Too many of you have had it beaten into you that taking losses is somehow good for you. It's not. It's just better than taking bigger losses.
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Thanks AAA
 
Huios,

Half the battle is figuring out what you are trying to do.

You are now half way home :)


Now if someone will kindly help me figure out what I am doing.. ??? :confused:
 
I am trading one contract right now. I believe I understand about the increased flexibility trading multiples, but I would love to hear your take on it.

I posted this the "Books about Money Management" thread in the Trading Forum, had to do with pyramiding positions.


Huios

Assuming you are position or swing trading...

The best kind of pyramid is the reverse one. Say your full position size is 6 ES contracts. Initial position is 3, first add is another 2, last add is 1. Or if you just have one add, the first position is 4 the second is 2.

You want your adds to be smaller than the initial, so if there is a large move against you, most of your position can be salvaged. Conversely you don't want to start with your full position, because if your wrong, you take less of a loss than with your full position.

If you are a scalper, it is a different scenario...

You start off with your full position, and begin to scale out right away if the move does not go in your direction right away.

Capital preservation is the key.

Note: I am not at the place in my trading where I am doing this at the present time. I have not personally tested these concepts. You wanted ideas, these are in my plan.

Best book: Tharps. Vince's, for me was a tough read.
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