Free MAP Trading Video & Report
A lot of people want to learn how to day trade e-minis. I hear a lot of misconceptions about trading e-minis, so I figured I’d do a quick video talking about some of the basics of emini trading. Keep in mind, to become a professional trader means a lot of practice and work. A system can help you become consistently profitable, but ultimately it’s up to you to execute and stay disciplined.
Here’s a video with Part 1 of Emini Day Trading:
It’s been another incredible week in the world on e-mini trading. Volume on the ES has sustained itself well above two million contracts daily, and the volatility has been extremely high. For those of you who watch the news, have you noticed a difference in the way the newscasters are speaking now compared to a month ago? In April, it was all great news about how the market was doing “so well”, and how we were “busting out of the bear market with strength”. Psh, I’ve been screaming at people not to get caught up in this emotional bullishness.
Anyways, this isn’t another rant about blind investing or emotional biases. Instead, I want to take a look at where the market could be heading for next week. We’ve had significant sell-offs into very strong levels of support. I think a lot of people are kind of questioning where the market’s going next, so let’s take a look…
Take a look at this 60 minute chart on the S&P 500 e-mini futures contract. Heading into June, we’re stuck in between two important levels: 1,085 and 1,100. The area around 1,085 was acting as a strong level of resistance for over a week before gapping up above it yesterday, which turned 1,085 into support. Yesterday, we also attempted to close the gap down from 5/20 above 1,100. Notice the red shaded area, which is longer term resistance from the beginning of the month.
Eventually, we’ll break out of this range. When we do, I’m looking at two key areas. If we break up above 1,100. we could run to the next level of resistance around 1,120. That level is also confirmed with a trendline of resistance coming down from the highs of the year. If the downside momentum continues, then the next area is around 1,040 – 1,050, which is the low of the year.
There are a lot of people speculating about where this market is headed. For my type of trading (day trading), it really doesn’t matter. Unlike when the market was up around 1200, I can see an argument for both sides of the equation. There has been significant selling from the highs, but we’ve had a strong bounce off of key support areas. Instead of trying to guess, I’m going to enjoy profiting from other traders’ opinions and let them go gray from worrying about the long term direction of the market.
Have a great long weekend and I’ll see you guys next week!
Chris Dunn
What do you think is a stronger emotion, fear or greed? Let’s answer that by looking at a few examples…
Imagine a stock broker who was doing his job in during the tech boom around 2000. His job was probably pretty easy, right? From his perspective, everyone wanted a piece of the pie. Typically, when the general public hears of a fast and easy way to make money, they’re usually quick to jump on the band-wagon to make a quick buck. However, the stock broker still has to make an effort (sometimes with outbound calls) to get people to invest with his company.
Greed may be a strong emotion, but I think the fear of loss is much greater. Here’s why…
Now think about that same retail investor, who was probably uneducated in market dynamics, when the bubble started to burst. As prices were falling faster than a lead filled balloon, who do you think was being “proactive” then? My guess is the stock broker didn’t have to make any outbound calls. As a matter of fact, I’m willing to bet his phone was ringing off the hook with people trying to pull their money out of the market.
I think this S&P 500 e-mini daily chart from February 2010 up to May 2010 gives a solid example in the differences in fear and greed. You’ll notice how it took almost 3 months for the market to gain about 180 points, yet it only took 8 days (about 9% of the time) to lose around 90% of the gains.
Let’s break this down from a perspective of two groups: professional traders and retail traders. In my blog post on 05/05/10, when the DOW had a massive drop of around 1,000 points, I show where the retail traders got net long the market right around the same time the pro’s got net short the market. If you look at the COT Net Position indicator over time, you’ll see a pretty steady inverse correlation between the pro traders and retail traders. It’s almost like the money gets transferred from the retail traders to the pro’s.
As professionals, I think one of the best things we can focus on is what the other 98% are thinking… and do the opposite. If we can recognize the actions and perceptions of the masses ahead of time, we can usually profit big.
There’s a lot of great information about Trading Psychology. One person whom I have a lot of respect for is Dr. Brett Steenbarger. His blog has been instrumental in developing a proper trading mindset over the years.
So, after a single negative trading day last week, I’m back strong… This morning I had 4 trades, 3 wins, and 1 loss for a net of +6.25 points. I had an idea about what the market could do today based on some longer term charts. You can check out my market forecast video on the Emini Academy Blog. Just to reiterate, I don’t care what happens intra-day on the monthly, daily or 60 minute chart. But it gives me a good high level overview that can create a nice objective bias.
As I mentioned in our live trading room this morning, you have to learn to think one or two steps ahead of the market. Basically, look at trading like a chess game. Here’s what that means to me…
When I’m looking to get in a trade, I want to see the trade hit my target before I even get in the market. If I can’t see the potential for the trade to work out, then I just sit on my hands. Doing this gives me really strong conviction in my trade, and the confidence to hold for the target. And today it gave me the confidence to double or triple my size on 3 trades, two of which were winners. 
A few students asked me how to develop a strong trading psychology and the ability to “think two steps ahead of the market”. And the simple answer is this: practice, repetition, and burning those damn images into your mind. You have to be able to close your eyes at any given moment and “define” a winning trade in your own mind’s eye. I think about this stuff so much that I dream about it… dead serious! And in some dreams I can actually feel the emotions and physical sensations of what it’s like to be in a trade.
There are no short-cuts… Only dedicated study to develop your craft. Anyone who tells you otherwise probably doesn’t trade. The good news is it doesn’t have to take years to develop. I’ve seen some traders become consistently profitable in a matter of weeks. Does that happen for everybody? Nope. But it’s possible… And the ones who do very well all go through the same process.
Just another random thought from your e-mini guy…
Chris Dunn
Trading is a business and performance activity that must be measured over the long-term, but managed on a trade-by-trade, micro level. For example, your main goal should be to come out net profitable over a period of trades, days, weeks, or months. It doesn’t really matter if you win any single trade, only if you win over time. On the other hand, you must make sure you execute each trade to the best of your ability.
Just like in poker, you’ll win some hands and lose some. You’re not trying to take the entire table’s cash on every single trade, and you shouldn’t try and do that with the market either. Instead of looking for the daily grand-slam, go for consistent base hits. And if you have a winning strategy, good risk management, and stay disciplined, you’re chances of being profitable are infinitely greater.
Don’t be over-eager to get into a trade. If you open your trading platform too anxious to place a trade, chances are you’ll get yourself into a less-than-optimal situation. So just sit back and relax; your trade could be right around the corner. I always like to start with a prime trade; something I feel really confident about. Just to reiterate, I don’t care if that trade works or not, I just want to gain self-confidence and know that I’m executing on my plan. And when I’m in the zone, you don’t want to be on the other side of my trades. So, when you get a “prime setup”, play them big. And play them as if they have the potential to be a grand-slam. Not every trade will turn out to be a huge winner, but give it a chance to show you if it’s going to turn into one. On the other side, if the trade starts to fizzle out, then don’t get attached by hanging on. Get comfortable with scraping trades and getting ready for the next.
Don’t think about the money when trading. Instead, focus on your performance and execution on every trade. Focus solely on your technical strategy and management plan, not if you’re positive or negative at that current moment. It’s possible to be winning, but trading poorly. Sooner than later, it will catch up with you.
Ask yourself this question: “Is self-control really that hard?” A lot of people slave away for 40, 50, 60 or more hours a week, often doing jobs they hate. All you have to do is sit on your hands when the deck isn’t stacked in your favor, then play strong when they are. This is often the most difficult part of trading for a lot of traders. A person can be disciplined for 95% of the month, then have a temporary moment of laziness that can wipe out a major portion of their profit. So, you must play like a professional until the game is over!
I’m super-proud to say we’re one of the top rated trading education companies on Investimonials. Check out our page here: http://www.investimonials.com/newsletters/reviews-emini-academy.aspx
Over the past 30 days I’ve been implementing a few different nuances to my trade entry and management style. I’ve been testing a few strategies with my programmers, and have been practicing them after-hours with NinjaTrader market replay. Only recently have I started to trade the adjusted style with some size in the live market…
For the past 3 to 4 years, I’ve primarily been an all-in, all-out trader. Meaning, I get in to a trade with a single entry, then get out with one or two entries. This has worked well for me, but only because I’ve developed and maintain a disciplined entry strategy. Those that are using the MAP Trading Strategy know about our 3 entry patterns.
Having developed into sort of a perfectionist with my trading, sometimes I tend to get frustrated if I don’t pick off an entry or exit right at the best price. Granted, it hasn’t been that big of an issue, but I’m always looking to improve.
One thing that can help take the edge off of having to execute perfect entries and exits, is being able to “glide” into a trade by placing a series of orders throughout a single trade (flat to flat). If I know the market has the probability to take a few bars (233 tick bars) to pivot, then I’ll hit the bid/ask anywhere in between 2 and 5 times. Basically, I’m breaking my usual contract load into 3rd’s or 5th’s. Don’t get me wrong, I’m not scaling in to every single trade; only the ones where I know I have time and don’t need to be extremely precise on the exact entry price and bar. If I have price that goes a couple ticks against me, I can add to the order, effectively getting a better price. But I’ll only do this if my entry pattern is still valid, and the original compelling reasons to take the trade are still there. Sometimes I’ll add if I get a little pop in my favor that breaks a squeeze, but only if I have room for my maximum stop of 1.25 points to be below/above the latest pivot price.
In addition to the softer entry strategy, I’ve been getting better at taking graceful exits. If I feel like a trade isn’t going to work out, I’ll just close on market. More times than not my gut is right, but if not, then I have no problem getting right back in.
The exits historically have been pretty clean and clear for me… with the exception of when I’ll get up 2+ points, not hit a target, then have the market come back and take me out. Sometimes my psyche can take it, other times it really rocks my world. So, to combat that instinctual drive to maximize my profits, I’ve let myself take about 10%-20% of my trade off prior to my main target. For any MAP Mastery students reading this, you might be freaking out and saying something like, “But Chris, our baseline trading plans typically say to hold for the target or let the market hit your stop.” For beginners, that’s absolutely true. I think it’s vital to gain confidence in whatever targets you’re using. Also, you need to develop the skill of being able to hold for your target instead of getting shaken out of every tick. But once you develop that confidence, I think you really need to sink into your own personality and risk tolerance.
To sum it all up, my technical strategy really hasn’t changed. My setups are the same, my entry patterns and targets are the same… all that’s been adjusted is a few management nuances that I believe will increase my long-term profitability and take some of the edge off. Like I’ve said a million times, there’s no single “right” way to do this business… Actually, there is a right way. That way is your way!
Just another personal trading insight…
Chris Dunn
After a profitable trading morning session, I decided to take the afternoon off to enjoy some time in downtown Buenos Aires, Argentina. And as I was sipping on some “cafe con leche”, the markets were going into a state of panic and confusion. Within 30 minutes the DOW fell about 1,000 points, which dipped below 10,000 (around $9,869), then capitulated back up to $10,520 for a loss of $347.80 (3.2%) on the day.
I can only guess as to why it happened… CNBC says there was a mistake made by a Citibank trader, who’s fat finger hit “B” for billion, instead of “M” for million, which assisted in a huge sell-off in Proctor & Gamble’s stock. Also, there’s been a lot of talk about the financial crisis in Greece and other European countries. I think all that mess, mixed with emotional selling and stops being hit, sent the market into a frenzy.
Cramer was live on the air when the Proctor and Gamble sell-off hit. Historically, I haven’t been a Cramer fan, but I gotta hand it to him. He made a very timely call live on the air to buy PG at a $49.25 bid, and in less than 3o seconds it was back up to $60. I’m sure a few quick traders made an easy six figure profit. Here’s the live Cramer video.
Over the past couple of weeks, I’ve been talking about why we should see a some downside moves in the markets. As I’ve mentioned on the Emini Academy Blog recap videos, we’ve been in an extremely over-exuberant bullish run since early February of this year. We’ve seen both retail and institutional investors buying the hell out of the market, which we knew could not be sustained forever. And as we approached the 61.8% retracement of the bear run from 2008 and 2009, we put in a nice head and shoulders reversal pattern. We also saw professional traders get net short on the futures markets toward the end of March (another sign that a reversal was coming). And as the retail investors were buying into resistance, the pros were selling down to support, which made for some nice oscillations and increased volatility.
I think today was a wake up call for people who had a unreasonable bullish bias on the markets. In only a few short days, we saw the market dip to lows of the year, taking out a lot of stops on the way down. Who knows what will come out of this craziness? I’m sure we’ll see some investigations, speculation, and maybe even some regulation… but for the time being, I’m going to stay focused on what I do best and stick to my intra-day trading plan, and let the news anchors stress about where the markets are headed.
Stay profitable, disciplined, and sharp…
Until next time.
- Chris Dunn
E-mini Day Trader & Founder of the Emini Academy
Well, we made it down to Buenos Aires, Argentina and just got through our first trading day. Thankfully, today was a profitable day for us. We had a 66% win ratio this morning, and were able to pull out a few points in the e-mini S&P 500.
I wanted to introduce Marcello Arrambide, who has been a long-time trading partner of mine. He also runs our live trading room with our MAP Mastery students for the Emini Academy.
Well, it’s been a few months since I’ve been out of the country. Ever since our last trip to Costa Rica, I’ve been hacking away at the e-mini futures markets. Also, I’ve been immersed with our MAP Mastery class, which is a group of 30 traders who have invested 95 days to learn how to trade the MAP Trading Strategy.
Anyway, we kicked around a few ideas for our next trading trip, and the winner for this time of the year is Buenos Aires, Argentina! We chose Buenos Aires for a few reasons… First, it’s known as the “Paris of the south”. The rich culture and European influence makes for a really cool experience. Next (and most importantly), the internet is fast and reliable enough to day trade e-minis. We’re taking a few air cards just in case the main cable goes out, but I think we’ll be just fine.
Also, I’ve been wanting to improve my trading via laptop. I usually trade with two 22″ monitors, but I’m only taking a 15″ laptop with an extra 17″ monitor. It takes a day or two to get adjusted, but becomes natural after pegging a few trades.
We locked down a really sweet apartment right in San Telmo. This town square we’re staying around is where tango music was invented. I might end up looking like a dork, but I figure I’ll give it a shot. After all, when in Rome… or Buenos Aires.
So, any ideas where we should head in the summer? For our next trip, we were thinking about Italy or Ireland. I’ve never traded from Europe before, and I’m curious to see how the time change effects my game. Anybody have any experience with this?
Until next time…
Over the past 8 years, my Emini Academy team and I have been able to test over 200 different trading strategies and systems in the e-mini, currency, and equity markets. We’ve used and abused everything from standard indicators, to fully-automated trading systems. As a result, we found 6 key components that would repeat themselves in most of the winning strategies.
The purpose of this article is not meant to give you an all-inclusive list of what you need to have in a winging strategy; however, it’s meant to show you the 6 key components we require of any strategy we choose to trade. Our required components are as follows: price pivot areas, momentum, multiple time frames, profit targets, entry strategy and high probability trade setups.
1. Price Pivot Areas – When we talk about “price pivot areas”, we’re not referring to floor trader pivots or any single way of pre-plotting potential pivot areas. Rather, we’re looking at what the market is doing now to determine current areas where the market has a high probability of changing direction. There are thousands of ways to find pivot areas. For example, you can use basic price support and resistance. Also, there are many indicators and oscillators that, when used properly, can accurately predict when price should pivot.
2. Momentum – It can be extremely valuable to add an extra level of perspective through “momentum” indicators. And since not all price moves are created equal, it’s important to have the ability to measure the strength (or weakness) behind a move in price. Furthermore, gauging momentum into potential pivot areas can help you anticipate if an area should hold or break.
3. Multiple Time Frames – This has been an area of confusion for a lot of traders. I’ve seen people use everything from a single time-frame, up to a dozen time frames on a single market. We typically use two time-frames when trading a single market. This gives us different “zoom levels”, which can help with pin-pointing our entries and managing our exits. We use our “main chart” where we look for our setups to line up. Then, we use a smaller chart as our “entry chart” to help us pin-point the entry and gauge short-term momentum.
4. Profit Targets – We’ve seen a wide range of opinions when it comes to using profit targets. On one side of the fence, you’ve got traders who use automatic profit targets based on pre-determine dollar values. For example, Trader A might use an automatic target of 4 points ($200 per contract) on the S&P 500 e-mini futures contract. The other school of thought says that you don’t need to use any targets, and only close the trade once the market shows conditions favorable to exiting the market. We use “dynamic profit targets”, which give us a way to gauge the initial profit potential on a trade, but also leave us open to take profit prior to or beyond our initial target based on what the market is showing us in real-time.
5. Entry Strategy – Have you ever known that you were looking to go long or short, but didn’t know exactly when to pull the trigger? If you answered yes, then what you are lacking is a structured entry strategy. An entry strategy is simply a set of rules that tells you when to pull the trigger and where to place your entry and stop. This is a vital piece of the puzzle that, if handled properly, can take a lot of the emotions and guessing out of trading. We typically have 3 entry strategies to any system. Basically, we look for entry characteristics that help us to execute a low risk entry and maximize the potential reward.
6. High Probability Trade Setups – When we bring all of the previous 5 components together, we look to structure what we call “high probability trade setups”. Essentially, we’re looking for repeatable, defined patterns that give us a distinct “edge” over the market. We want to know that every time we pull the trigger, we’re going to win more than we lose, and our winners are going to be bigger than our losers. Some traders use fully-automated trading systems to take all the guessing out of their trade setups, while other traders use discretionary methodologies which rely highly on human intuition. At the Emini Academy, we use rules based, structured strategies that take the guessing out of what trades to take, but also allow our traders to trade the markets in a way that fits their personality and risk tolerance.
The most important thing is consistency. When you find something that works, stick with it. All too often, traders spend a lot of time and money “system hopping”, or constantly changing their approach to the markets. The key is to find a strategy that you are 110% confident can pull consistent profits from the market, and then stick to that system.
Best of luck in the markets,
Chris Dunn
Emini Academy
